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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
LIBERTY ALL-STAR EQUITY FUND
LIBERTY ALL-STAR GROWTH FUND, INC.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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LIBERTY ALL-STAR FUNDS
Dear Fellow Shareholder:
The Funds listed in the Notice of Special Meeting of Shareholders will hold a
special meeting on September 26, 2001, at 2:00 p.m., to vote on the proposals
listed in the proxy statement.
Liberty Financial Companies, Inc. (Liberty Financial), the parent company of the
Funds' investment advisor, has entered into an agreement to sell its asset
management business, including the Funds' investment advisor, to Fleet National
Bank (Fleet), an indirect wholly owned subsidiary of FleetBoston Financial
Corporation, a U.S. financial holding company. The sale will cause the Funds'
current advisory agreements and portfolio management agreements to terminate. In
order for the management of each Fund to continue uninterrupted after the sale,
we are asking you to approve new advisory agreements, including portfolio
management agreements, for the Funds. The proposed new advisory agreements are
substantially identical to the Funds' current advisory agreements, except as
described in the attached proxy statement. NO CHANGES IN ADVISORY FEE RATES OR
SERVICES ARE BEING PROPOSED.
Your vote is very important. The Boards of Trustees and Directors of the Funds
listed in the Notice of Special Meeting have approved the new advisory
agreements and new portfolio management agreements and recommend that you vote
in favor of the agreements. Please complete, sign and date the enclosed proxy
card and return it in the enclosed postage-paid return envelope. This will
ensure that your vote is counted, even if you cannot attend the meeting in
person.
It is important that you vote promptly. If you have any questions about voting,
please call 888-832-5694.
Sincerely,
/S/ WILLIAM R. PARMENTIER, JR.
William R. Parmentier, Jr.
President
August 6, 2001
G-60/585G-0601
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IMPORTANT NEWS
FOR FUND SHAREHOLDERS
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE IS A BRIEF OVERVIEW OF MATTERS TO BE VOTED UPON.
QUESTIONS AND ANSWERS
Q. What am I being asked to vote "For" in this proxy?
A. You are being asked to vote for proposals to:
1. Approve a new investment advisory agreement for your Fund with your
Fund's current investment advisor, on substantially identical terms as
the current investment advisory agreement. NO CHANGE IN ADVISORY FEE
RATES OR SERVICES IS BEING PROPOSED.
2. Approve a new portfolio management agreement for your Fund with your
Fund's current portfolio managers, on substantially identical terms as
the current portfolio management agreement. NO CHANGE IN PORTFOLIO
MANAGEMENT FEE RATES OR SERVICES IS BEING PROPOSED.
Q. Why am I being asked to vote on new agreements?
A. Liberty Financial Companies, Inc. (Liberty Financial), the parent company of
the investment advisor to the Funds listed in the Notice of Special Meeting
of Shareholders, has entered into an agreement to sell its asset management
business, including the Funds' investment advisor, to Fleet National Bank
(Fleet), an indirect wholly owned subsidiary of FleetBoston Financial
Corporation, a U.S. financial holding company. The sale will result in the
termination of the current investment advisory agreements and portfolio
management agreements. The sale will not be completed unless a number of
conditions are met. One of the conditions of the sale is that shareholders
of a percentage of the Funds and other accounts managed by Liberty Financial
affiliates must approve the proposed new agreements. Your Fund's Board of
Trustees or Directors has approved, and recommends that you approve,
agreements applicable to your Fund.
Q. What prompted the sale of Liberty Financial's asset management business to
Fleet?
A. On November 1, 2000, Liberty Financial announced that it had retained CS
First Boston to help explore strategic alternatives, including the possible
sale of Liberty Financial. Liberty Financial ultimately determined to sell
its asset management business to Fleet.
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Q. How will the sale of Liberty Financial's asset management business
potentially benefit me?
A. The Funds' Board of Trustees or Directors believes that there may be
benefits of scale from combining the asset management businesses of Fleet
and Liberty Financial, including the ability to attract and retain key
personnel, greater access to resources for investment professionals of the
advisors, enhanced technology and customer service, and the expected
availability of additional investment options for shareholders of the Funds.
Q. How do the proposed new agreements differ from the current agreements?
A. The proposed agreements are substantially identical to the current
agreements. They differ only in their beginning dates and terms and certain
other minor provisions. A comparison of the proposed new agreements is
included in the proxy statement under the heading "New Advisory and New
Portfolio Management Agreements."
Q. Will this change the advisory fees for my Fund?
A. No. Advisory fees will remain the same.
Q. Will there be any advisor changes?
A. No. The advisors that currently manage the Funds are expected to continue to
manage the Funds after the sale of Liberty Financial's asset management
business, using the same investment strategies and objectives currently in
place.
Q. How does the Funds' Board of Trustees or Directors recommend that I vote on
these proposals?
A. The Board of Trustees or Directors recommend that you vote "FOR" each of the
proposals. The Boards believe that each of these proposals is in the best
interests of your Fund and its shareholders.
Q. How can I vote my proxy?
A. For your convenience, there are several ways you can vote:
- By Mail: vote, sign and return the enclosed proxy card
- In person: September 26, 2001, at 2:00 p.m. at One Financial Center,
Boston, Massachusetts
- By Telephone or by Internet (not available for all shareholders; eligible
shareholders will receive an insert with instructions)
IT IS IMPORTANT THAT YOU VOTE PROMPTLY.
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LIBERTY ALL-STAR EQUITY FUND
(THE "EQUITY FUND")
LIBERTY ALL-STAR GROWTH FUND, INC.
(THE "GROWTH FUND" AND COLLECTIVELY, THE "FUNDS")
FEDERAL RESERVE PLAZA
600 ATLANTIC AVENUE, BOSTON, MASSACHUSETTS 02210
(617) 722-6036
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 26, 2001
A Special Meeting of the shareholders of each Fund will be held on September 26,
2001 at 2:00 p.m. at One Financial Center, Boston, Massachusetts for these
purposes:
1. To approve a new Investment Advisory Agreement with Liberty Asset Management
Company for each Fund;
2. To approve new Portfolio Management Agreements for each Fund with the
portfolio managers listed below:
Equity Fund
2a. Mastrapasqua & Associates, Inc.
2b. Oppenheimer Capital
2c. Boston Partners Asset Management, L.P.
2d. Westwood Management Corp.
2e. TCW Investment Management Company
Growth Fund
2f. TCW Investment Management Company
2g. William Blair & Company, L.L.C.
2h. M.A. Weatherbie & Co., Inc.
3. To consider and act upon any other matters that properly come before the
meeting and any adjourned session of the meeting.
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Shareholders of record at the close of business on July 16, 2001 are entitled to
notice of and to vote at the meeting and any adjourned session.
By order of the Board of By order of the Board of
Directors of the Growth Fund, Trustees of the Equity Fund,
William J. Ballou Secretary William J. Ballou Secretary
of Growth Fund of Equity Fund
August 6, 2001
PLEASE RESPOND PROMPTLY. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES YOU OWN. YOU CAN VOTE EASILY AND QUICKLY BY MAIL, IN PERSON, OR BY
PHONE OR INTERNET (NOT AVAILABLE FOR ALL SHAREHOLDERS; ELIGIBLE SHAREHOLDERS
WILL RECEIVE AN INSERT WITH INSTRUCTIONS).
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PROXY STATEMENT
LIBERTY ALL-STAR EQUITY FUND
(THE "EQUITY FUND")
LIBERTY ALL-STAR GROWTH FUND, INC.
(THE "GROWTH FUND" AND COLLECTIVELY, THE "FUNDS")
FEDERAL RESERVE PLAZA
600 ATLANTIC AVENUE
BOSTON, MASSACHUSETTS 02210
The Board of Trustees of Equity Fund and the Board of Directors of Growth Fund
(the "Boards") are soliciting proxies from the shareholders of each of the Funds
in connection with a Special Meeting of Shareholders of each Fund (the
"Meeting"). The Meeting has been called to be held on September 26, 2001 at 2:00
p.m. at One Financial Center, Boston, Massachusetts. The meeting notice, this
Proxy Statement and proxy cards are being sent to shareholders beginning on or
about August 6, 2001.
The only items of business that the Boards expect will come before the Meeting
are:
(1) approval of a new Investment Advisory Agreement for each Fund (each, a
"New Advisory Agreement") with Liberty Asset Management Company (the "Fund
Manager" or "LAMCO"), and
(2) approval of a new Portfolio Management Agreement for each Fund (each, a
"New Portfolio Management Agreement") with their respective portfolio managers
(each, a "Portfolio Manager").
SUMMARY OF PROPOSALS AND FUNDS AFFECTED*
1. PROPOSAL TO 2. PROPOSAL TO
APPROVE A NEW APPROVE NEW
INVESTMENT PORTFOLIO
ADVISORY MANAGEMENT
NAME OF FUND AGREEMENT AGREEMENTS
------------ -------------- --------------------
Liberty All-Star Equity
Fund X X
(2a, 2b, 2c, 2d, 2e)
Liberty All-Star Growth
Fund, Inc. X X
(2f, 2g, 2h)
* An "X" denotes that the Fund is affected by the proposal and that the Fund's
shareholders are being solicited with respect to that proposal.
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PROPOSALS 1 AND 2
NEW ADVISORY AND NEW PORTFOLIO MANAGEMENT AGREEMENTS
As explained below, the proposed New Advisory Agreement for each Fund and the
proposed New Portfolio Management Agreements for each Fund (the New Advisory
Agreements and the New Portfolio Management Agreements, as applicable for a
Fund, are referred to collectively as the "New Agreements") are substantially
identical (except for their terms and dates and certain other non-material
changes) to the Investment Advisory Agreement and Portfolio Management
Agreements currently in effect for that Fund (the "Current Advisory Agreement"
and "Current Portfolio Management Agreements," respectively, and collectively,
the "Current Agreements").
The reason the Boards are proposing a New Advisory Agreement for each Fund and
New Portfolio Management Agreements for each Fund is that the Current Advisory
Agreement and the Current Portfolio Management Agreements for each Fund will
terminate when the Fund Manager's parent company, Liberty Financial Companies,
Inc. ("LFC"), sells the Fund Manager and its other subsidiaries that operate its
asset management business (the "Asset Management Segment") to Fleet National
Bank, a national banking association ("Fleet"). As a result of this acquisition,
the Fund Manager and its other subsidiaries will become direct or indirect,
wholly owned subsidiaries of Fleet. The Investment Company Act of 1940, as
amended (the "Investment Company Act"), provides generally that the advisory
agreement of an investment company, as well as any portfolio management
agreement, such as any of the Current Portfolio Management Agreements, must
provide for automatic termination if assigned, such as when the investment
advisor or its parent company undergoes a significant change of ownership.
In addition, LFC has agreed to sell, in a separate transaction, all of the
issued and outstanding capital stock of the subsidiaries constituting the
annuity segment of LFC's business to Sun Life Assurance Company of Canada, a
Canadian corporation (the "Annuity Sale"). The sale of the Asset Management
Segment to Fleet and the Annuity Sale are not conditioned on each other. LFC has
entered into a Merger Agreement with Liberty Mutual Insurance Company (the
majority stockholder of LFC), which provides that, following the acquisition of
the Asset Management Segment by Fleet and the Annuity Sale, LFC Acquisition
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Corporation, a wholly owned subsidiary of Liberty Mutual Insurance Company, will
merge with and into LFC, with LFC being the surviving corporation (the
"Merger"). In connection with the Merger, holders of LFC common stock, other
than LFC, Liberty Mutual and their respective direct and indirect subsidiaries
and other than those holders of LFC common stock who validly perfect and
exercise their appraisal rights under Massachusetts law, will be entitled to
receive an amount of cash equal to $33.44, subject to adjustment, per share of
common stock. Once such Merger consideration is paid, such shares will be
cancelled.
The Boards have carefully considered the matter and have concluded that it is
appropriate to enter into the New Advisory Agreement and New Portfolio
Management Agreements, as applicable for each Fund, so that the Fund Manager and
Portfolio Managers can continue, following the acquisition of the Asset
Management Segment by Fleet, to manage each Fund on the same terms as are now in
effect. The Boards also have approved an interim advisory agreement and a
portfolio management agreement for each Fund pursuant to Rule 15a-4 under the
Investment Company Act, which will be entered into immediately following the
closing of the acquisition of the Asset Management Segment by Fleet only if the
Fund does not receive the requisite shareholder vote for the New Agreements at
the Meeting. See the section "Basis for the Boards' Recommendations" below for
further information on these interim agreements.
The acquisition of the Asset Management Segment by Fleet will occur only if
various conditions are satisfied (or waived by the parties, if permitted by
law). Those conditions include, among others, the receipt of certain government
approvals, approval or consent from investment advisory clients of the Fund
Manager and other LFC affiliates (including mutual fund clients) which represent
a specified percentage of LFC's total assets under management as of March 31,
2001, the avoidance of a certain level of net redemptions from portfolios
managed by the Fund Manager and certain of its affiliates that make up the Asset
Management Segment and approval of the acquisition by the requisite vote of the
shareholders of LFC. LFC currently expects that the acquisition will occur
during the latter part of 2001, but the acquisition could be delayed. If the
acquisition does not occur, the New Agreements would not be needed because the
automatic termination of the Current Agreements would not occur.
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Under the Investment Company Act, a Fund cannot enter into a New Advisory
Agreement and the Fund Manager cannot enter into a New Portfolio Management
Agreement unless the shareholders of that Fund vote to approve the New Advisory
Agreement and each New Portfolio Management Agreement. The Meeting is being held
to seek shareholder approval of the New Advisory Agreement for each Fund and the
New Portfolio Management Agreements for each Fund. NO CHANGE IN ADVISORY OR
PORTFOLIO MANAGEMENT FEE RATES OR SERVICES IS BEING PROPOSED.
Shareholders of each Fund will vote separately on the New Advisory Agreement for
that Fund and the New Portfolio Management Agreements for that Fund. Each share
is entitled to cast one vote, and fractional shares are entitled to a
proportionate fractional vote.
THE BOARD OF EACH FUND RECOMMENDS THAT THE SHAREHOLDERS OF SUCH FUND VOTE TO
APPROVE THE NEW ADVISORY AGREEMENT AND THE NEW PORTFOLIO MANAGEMENT AGREEMENTS
FOR THEIR FUND.
DESCRIPTION OF THE NEW ADVISORY AGREEMENTS
The New Advisory Agreement for each Fund is substantially identical (but for a
few non-material changes) to the Current Advisory Agreement for that Fund. The
date of each New Advisory Agreement will be the date that Fleet acquires the
Asset Management Segment, or such later date on which the shareholders of the
Fund approve the New Advisory Agreement, and the initial term of each New
Advisory Agreement expires on July 31, 2003. Appendix A1 to this Proxy Statement
sets forth information about the Current Advisory Agreements, including the
dates of the Current Advisory Agreements and the advisory fee rates under both
the New Advisory Agreements and the Current Advisory Agreements for each Fund.
Appendix B1 to this Proxy Statement contains the forms of the New Advisory
Agreements applicable to each Fund. Each Current Advisory Agreement and each New
Advisory Agreement matches the form in Appendix B1 for the applicable Fund,
except for the dates of the Agreements. The next several paragraphs briefly
summarize some important provisions of the New Advisory Agreements, but for a
complete understanding of the Agreements, you should read Appendices A1 and B1.
Each New Advisory Agreement essentially provides that the Fund Manager, under
the Boards' supervision, will: (1) appoint one or more
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portfolio managers to have full discretion and to make all determinations with
respect to the investment and reinvestment of the portion of the Fund's assets
assigned to that portfolio manager, and (2) provide officers, office space and
certain administrative services to the Fund.
The New Advisory Agreement for each Fund provides that it will continue in
effect for an initial period beginning on the date Fleet acquires the Asset
Management Segment, or such later date on which the shareholders of each Fund
approve the New Advisory Agreements, and ending on July 31, 2003. After that, it
will continue in effect from year to year as long as the continuation is
approved at least annually (i) by each Fund's respective Board or by vote of a
majority of the outstanding voting securities of the Fund, and (ii) by vote of a
majority of each Fund's respective Board who are not "interested persons," as
that term is defined in the Investment Company Act, of the Fund or the Fund
Manager (those Trustees or Directors who are not "interested persons" of the
Fund, the Fund Manager or any Portfolio Manager for that Fund are referred to
below as the "Independent Board Members").
The New Advisory Agreement for each Fund may be terminated without penalty by
vote of the Board or by vote of a majority of the outstanding voting securities
of the Fund, on sixty days' written notice to the Fund Manager, or by the Fund
Manager upon sixty days' written notice to the Fund, and each terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act. The Investment Company Act defines "assignment" to include, in
general, transactions in which a significant change in the ownership of an
investment advisor (including a portfolio manager) or its parent company occurs
(such as the acquisition of the Asset Management Segment by Fleet).
The New Advisory Agreement for each Fund provides that the Fund Manager will not
be liable to the Fund or its shareholders, except for liability arising from the
Fund Manager's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties.
Pursuant to a pricing and bookkeeping agreement, Colonial Management Associates,
Inc. ("Colonial"), a wholly owned subsidiary of Liberty Funds Group LLC, which
in turn is a direct wholly owned subsidiary of Liberty Financial Services, Inc.,
which is a direct wholly owned subsidiary of LFC, is responsible for providing
certain services to the Funds. The aggregate pricing and bookkeeping fees paid
by each Fund to
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Colonial for the most recently completed fiscal year are set forth in Appendix
E. Whether or not the proposed New Advisory Agreements are approved, the pricing
and bookkeeping agreements for each Fund will remain in effect.
DESCRIPTION OF THE NEW PORTFOLIO MANAGEMENT AGREEMENTS
The New Portfolio Management Agreements for each Fund are substantially
identical (but for a few non-material changes) to the Current Portfolio
Management Agreements for those Funds. The date of each New Portfolio Management
Agreement will be the date that Fleet acquires the Asset Management Segment, or
such later date on which the shareholders of each Fund approve the New Portfolio
Management Agreement, and the initial term of each New Portfolio Management
Agreement expires on July 31, 2003. Appendix A2 to this proxy statement sets
forth information about the Current Portfolio Management Agreements, including
the dates of the Current Portfolio Management Agreements and the advisory fee
rates under both the New Portfolio Management Agreements and the Current
Portfolio Management Agreements. Appendix B2 to this proxy statement contains
the form of the New Portfolio Management Agreement. Each Current Portfolio
Management Agreement and each New Portfolio Management Agreement matches the
form in Appendix B2, except for the changes noted above and items specific to a
Fund, such as the Fund's name and fee rate. The next several paragraphs briefly
summarize some important provisions of the New Portfolio Management Agreements,
but for a complete understanding of the Agreements, you should read Appendices
A2 and B2.
The New Portfolio Management Agreements essentially provide that the Portfolio
Manager, under the Boards' and the Fund Manager's supervision and subject to the
respective Fund's registration statement, will (1) decide what securities to buy
and sell for the Fund's (or a portion of the Fund's) portfolio, (2) select
brokers and dealers to carry out portfolio transactions for the Fund (or the
portion of the Fund's portfolio managed by the Portfolio Manager) and (3) report
results to the Boards of the Funds.
The New Portfolio Management Agreements provide that they will continue in
effect for an initial period beginning on the date Fleet acquires the Asset
Management Segment, or such later date on which shareholders of each Fund
approve the New Portfolio Management
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Agreements, and ending on July 31, 2003. After that, they will continue in
effect from year to year as long as the continuation is approved at least
annually (i) by each Fund's respective Board, (ii) by vote of a majority of the
outstanding voting securities of the relevant Fund, or (iii) by vote of a
majority of the Independent Board Members.
The New Portfolio Management Agreements may be terminated without penalty (i) by
vote of each Fund's respective Board or by vote of a majority of the outstanding
voting securities of the relevant Fund, on thirty days' written notice to the
Portfolio Manager, (ii) by the Fund Manager upon thirty days' written notice to
the Portfolio Manager, or (iii) by the Portfolio Manager upon ninety days'
written notice to the Fund Manager and the Fund, and the New Portfolio Manager
Agreements terminate automatically in the event of their "assignment," as
described above, or upon termination of the New Advisory Agreement.
The New Portfolio Management Agreements provide that the Portfolio Manager will
not be liable to the Fund Manager, the relevant Fund or its shareholders, except
for liability arising from the Portfolio Manager's willful misfeasance, bad
faith, gross negligence or violation of the standard of care established by and
applicable to the Portfolio Manager in its actions under the New Portfolio
Management Agreements or breach of its duty or obligations under the New
Portfolio Management Agreements.
BASIS FOR THE BOARDS' RECOMMENDATIONS
The Boards initially met on June 11, 2001 to discuss the proposed acquisition of
the Asset Management Segment by Fleet. At that meeting, representatives of LFC
made a presentation regarding the terms of the proposed acquisition and
representatives of Fleet made a presentation regarding Fleet's structure and
asset management business and their plans as they existed at that time for the
Asset Management Segment. At a meeting held on June 20, 2001, LFC and Fleet
provided the Boards with additional information that they had requested. At a
meeting held on July 23, 2001, the Boards gave further consideration to the
proposed acquisition and reaffirmed their recommendation that shareholders vote
to approve the New Agreements.
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The Boards determined at the June 20, 2001 meeting to recommend that each Fund's
shareholders vote to approve the New Advisory Agreement and the New Portfolio
Management Agreements for their Fund.
In coming to that determination, the Boards gave particular consideration to
matters relating to the possible effects on the Fund Manager and the Funds of
the acquisition of the Asset Management Segment by Fleet. Among other things,
the Boards considered:
- the stated intention of Fleet not to make immediate changes to the investment
management services provided by the Fund Manager and to collaborate with the
Fund Manager, in consultation with the Boards of the Funds, to develop and
implement a strategy for integrating the investment management business of
the Fund Manager with Fleet's investment management business;
- certain actions taken by LFC and the Fund Manager to help retain and incent
their key personnel;
- the general reputation and the financial resources of Fleet and its parent
organization;
- the potential benefits of scale from combining the asset management
businesses of Fleet and LFC, including the ability to attract and retain key
personnel and enhance technology and customer service;
- the expected additional investment options available to shareholders of the
Funds;
- the impact of the acquisition of the Asset Management Segment on the
different types of investors in the Funds; and
- the stated intention of Fleet of providing investment professionals of the
Fund Manager with access to greater resources as a result of the acquisition.
In addition, the Boards considered a wide range of information of the type they
regularly consider when determining whether to continue a Fund's advisory
agreement as in effect from year to year. The Boards considered information
about, among other things:
- the Fund Manager and Portfolio Managers and their respective personnel
(including particularly those personnel with responsibilities for providing
services to the Funds), resources and investment process;
- the terms of the New Advisory Agreements and the New Portfolio Management
Agreements;
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- the scope and quality of the services that the Fund Manager has and Portfolio
Managers have been providing to the Funds;
- the investment performance of each Fund and of similar funds managed by other
advisors;
- the advisory fee rates payable to the Fund Manager by the Funds, and by the
Fund Manager to the Portfolio Managers, and by other funds and client
accounts managed by the Fund Manager and Portfolio Managers, and payable by
similar funds managed by other advisors (Appendix C to this Proxy Statement
contains information comparing each Fund's advisory fee schedule to the fee
schedule for other funds managed by the Fund Manager and, where applicable,
one or more Portfolio Managers, that have investment objectives similar to
the particular Fund);
- the total expense ratios of the Funds and of similar funds managed by other
advisors; and
- compensation payable by the Funds to affiliates of the Fund Manager and
Portfolio Managers for other services (see Appendix E to this Proxy Statement
for more information about that compensation).
In addition, the Boards considered that the agreement relating to the
acquisition by Fleet provides that Fleet will (subject to certain
qualifications) use all reasonable efforts to assure compliance with Section
15(f) of the Investment Company Act. Section 15(f) provides that a mutual fund
investment advisor or its affiliates may receive benefits or compensation in
connection with a change of control of the investment advisor (such as Fleet's
acquisition of the Asset Management Segment) if two conditions are satisfied.
First, for three years after the change of control, at least 75% of the members
of the board of any registered investment company advised by the advisor must
consist of persons who are not "interested persons," as defined in the
Investment Company Act, of the advisor. (No changes in the current composition
of the Boards are required to satisfy that condition, except that Mr. Palombo is
expected to resign his position on the Boards prior to the closing of the
acquisition, because he is an "interested person" of the Fund Manager.) Second,
no "unfair burden" may be imposed on any such registered investment company as a
result of the change of control transaction or any express or implied terms,
conditions or understandings applicable to the transaction. "Unfair burden"
means any arrangement, during the two years after the transaction, by which the
investment advisor or any "interested person" of the advisor receives or is
entitled to
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receive any compensation, directly or indirectly, from such investment company
or its security holders (other than fees for bona fide investment advisory or
other services) or from any other person in connection with the purchase or sale
of securities or other property to, from or on behalf of such investment
company.
After carefully considering the information described above, the Boards,
including the Independent Board Members, unanimously voted to approve the New
Advisory Agreement for each Fund and the New Portfolio Management Agreements for
each Fund and to recommend that each Fund's shareholders vote to approve the New
Advisory Agreement and the New Portfolio Management Agreements for their Fund.
In the event that the shareholders have not approved the New Advisory Agreements
and New Portfolio Management Agreements at the time of the acquisition of the
Asset Management Segment by Fleet, the Fund Manager and Portfolio Managers will
enter into interim advisory agreements and portfolio management agreements
pursuant to Rule 15a-4 under the Investment Company Act, which will take effect
immediately following the acquisition of the Asset Management Segment by Fleet
(at which time the Current Agreements will terminate due to an assignment).
These interim advisory agreements and portfolio management agreements will be in
substantially the forms set forth in Appendices B1 and B2 but also will include
certain provisions required by Rule 15a-4 (such as a maximum term of 150 days, a
provision that a Fund's Board or a majority of the Fund's shareholders may
terminate the agreement at any time without penalty on not more than 10 days'
written notice, and a provision that the compensation earned by the Fund Manager
and Portfolio Managers thereunder will be held in an interest-bearing escrow
account until shareholder approval of the relevant New Agreements is obtained,
after which the amount in the escrow account (together with any interest) will
be paid to the Fund Manager and Portfolio Managers). If a Fund has not received
the requisite shareholder approval for a New Advisory Agreement or the New
Portfolio Management Agreements within 150 days after the closing of the
acquisition, the Boards will consider other appropriate arrangements subject to
approval in accordance with the Investment Company Act.
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INFORMATION ABOUT THE FUND MANAGER, THE PORTFOLIO MANAGERS AND THE FLEET/LFC
TRANSACTION
LIBERTY ASSET MANAGEMENT COMPANY
Liberty Asset Management Company ("LAMCO"), a Delaware corporation, located at
600 Atlantic Avenue, Boston, Massachusetts 02210, is the Funds' manager. LAMCO
is an indirect wholly owned subsidiary of LFC, the address of which is also 600
Atlantic Avenue, Boston, Massachusetts 02210. As of May 31, 2001, LAMCO managed
over $1.4 billion in assets.
The directors of LAMCO are Lindsay Cook, J. Andrew Hilbert and William R.
Parmentier, Jr. The business address of Messrs. Cook, Hilbert and Parmentier is
600 Atlantic Avenue, Boston, Massachusetts 02210. William R. Parmentier, Jr. is
President, Chief Executive Officer and Chief Investment Officer of LAMCO and
President of the Funds.
In addition, the following individuals who are officers of the Funds are also
officers of LAMCO: Christopher S. Carabell and Mark T. Haley.
LFC is a direct majority-owned subsidiary of LFC Management Corporation, which
in turn is a direct wholly owned subsidiary of Liberty Corporate Holdings, Inc.,
which in turn is a direct wholly owned subsidiary of LFC Holdings, Inc., which
in turn is a direct wholly owned subsidiary of Liberty Mutual Equity
Corporation, which in turn is a direct wholly owned subsidiary of Liberty Mutual
Insurance Company ("Liberty Mutual"). As of June 30, 2001, LFC Management
Corporation owned 70.46% of the common stock of LFC and the balance is held by
the public and listed on the New York Stock Exchange. LFC is a diversified and
integrated asset management organization which provides insurance and investment
products to individuals and institutions. Liberty Mutual is an underwriter of
workers' compensation insurance and a property and casualty insurer in the
United States, organized under the laws of Massachusetts in 1912. The principal
business activities of Liberty Mutual's subsidiaries other than LFC are
property-casualty insurance, insurance services and life insurance (including
group life and health insurance products) marketed through its own sales force.
The principal executive offices of LFC Management Corporation, Liberty Corporate
Holdings, Inc., and LFC Holdings, Inc., Liberty Mutual and Liberty Mutual Equity
Corporation are located at 175 Berkeley Street, Boston, Massachusetts 02117.
13
18
Pursuant to its Current Advisory Agreement with each Fund, LAMCO implements and
operates a multi-manager methodology and has overall supervisory responsibility
for the general management and investment of each Fund's securities portfolio,
subject to the respective Fund's investment objectives and policies and any
directions of the Boards. LAMCO recommends to the Boards multiple independent
investment management firms for appointment as Portfolio Managers for each Fund,
each of which employs a different investment style, and from time to time
rebalances each Fund's portfolio among its Portfolio Managers so as to maintain
an approximately equal allocation of the portfolio among the investment styles
practiced by them throughout all market cycles. LAMCO continuously analyzes and
evaluates the investment performance and portfolios of each Fund's Portfolio
Managers and from time to time recommends changes in the Portfolio Managers.
Information about the Equity Fund's current Portfolio Managers is set forth
below.
Mastrapasqua & Associates, Inc. Mastrapasqua & Associates, Inc.
("Mastrapasqua"), an investment advisor since 1993 and an independently owned
firm, is located at 814 Church Street, Suite 600, Nashville, Tennessee 37203.
Ownership of Mastrapasqua lies 100% with its officers and trustees.
Mastrapasqua's principal executive officer is Frank Mastrapasqua, Ph.D.,
Chairman and Chief Executive Officer. Mr. Mastrapasqua, Thomas A. Trantum,
President, and Mauro Mastrapasqua, First Vice President, may be deemed to be
control persons of Mastrapasqua by virtue of their aggregate ownership of more
than 25% of the outstanding voting stock of Mastrapasqua. As of May 31, 2001,
Mastrapasqua managed approximately $2.3 billion in assets.
Oppenheimer Capital. Oppenheimer Capital ("Oppenheimer"), an investment advisor
since 1969, is located at 1345 Avenue of the Americas, New York, New York 10105.
Oppenheimer is a Delaware partnership and an indirect subsidiary of Allianz A.G.
Oppenheimer's principal executive officer is Kenneth M. Poovey. As of May 31,
2001, Oppenheimer managed over $35.7 billion in assets.
Boston Partners Asset Management, L.P. Boston Partners Asset Management, L.P.
("Boston Partners"), an investment advisor since 1995, is located at 28 State
Street, Boston, Massachusetts 02109. The Sole General Partner of Boston Partners
is Boston Partners, Inc., a
14
19
Delaware Subchapter S Corporation. Desmond J. Heathwood is the President of
Boston Partners, Inc. As of May 31, 2001, Boston Partners managed over $10.9
billion in assets.
Westwood Management Corp. Westwood Management Corp. ("Westwood"), an investment
advisor since 1983, is located at 300 Crescent Court, Dallas, Texas 75201 and is
a wholly owned subsidiary of Southwest Securities Group, Inc. Westwood's
principal executive officer is Susan M. Byrne and its directors are Ms. Byrne,
Brian Casey, Don A. Buchhotz, David Glatstein, and Patricia R. Fraze. As of May
31, 2001, Westwood managed over $3.7 billion in assets.
TCW Investment Management Company. TCW Investment Management Company ("TCW"), a
wholly owned subsidiary of The TCW Group, Inc. ("TCW Group"), is located at 865
South Figueroa Street, Los Angeles, California 90017. Established in 1971, TCW
Group's direct and indirect subsidiaries, including TCW, provide a variety of
trust, investment management and investment advisory services. Societe Generale
Asset Management, S.A. ("SGAM") owns 51% of the TCW Group. SGAM is a wholly
owned subsidiary of Societe Generale, S.A. ("Societe Generale"). SGAM is located
at 92708 place de la Corpole, 92078 Paris, France. Societe Generale is located
at 29 Boulevard Haussman, 75009, Paris, France. The employees, management, and
other shareholders of the TCW Group own the remaining 49% of the company. Under
the terms of an agreement between the TCW Group and SGAM, SGAM will acquire an
additional 19% interest in the TCW Group over the course of the next five years.
SGAM and TCW have stated their intention to maintain the personnel, processes,
investment strategy and operations of TCW, which will continue to operate under
the TCW brand name. As of May 31, 2001, TCW and its affiliates had over $75
billion in assets under management or committed to management.
Information about the Growth Fund's current Portfolio Managers is set forth
below.
William Blair & Company, L.L.C. William Blair & Company L.L.C. ("Blair"), a
registered investment advisor, is located at 222 West Adams Street, Chicago,
Illinois 60606. Blair is also an investment banker and broker-dealer firm
registered under the Securities Exchange Act of 1934. Blair was founded over 50
years ago by William McCormick Blair and currently has more than 70 principals
and approximately 900 employees at offices in Chicago, San Francisco, London,
Liechtenstein and Zurich.
15
20
The main office in Chicago houses all investment banking, research and
investment management services. As of May 31, 2001, Blair had over $13 billion
in assets under management.
TCW Investment Management Company. See description above.
M.A. Weatherbie & Co., Inc. M.A. Weatherbie & Co., Inc. ("Weatherbie"), a
registered investment advisor, located at 265 Franklin Street, Boston,
Massachusetts 02110, was founded in 1995 by Matthew A. Weatherbie. Mr.
Weatherbie is the principal executive officer and serves as President of
Weatherbie. In addition to Mr. Weatherbie being the senior principal, there are
five other principals, three research analysts, a trader and a director of
administration. Weatherbie is 100% employee-owned and operated with a
partnership philosophy. As of May 31, 2001, Weatherbie managed over $424 million
in assets.
DESCRIPTION OF THE TRANSACTION
On June 4, 2001, LFC announced that it had entered into a Stock Purchase
Agreement with Fleet (the "Purchase Agreement"). Under the Purchase Agreement,
Fleet would acquire the Asset Management Segment for a purchase price of $900
million, plus the assumption of approximately $110 million in debt. This price
may be adjusted:
- upward or downward based on increases or decreases in the amount of
portfolios managed by the subsidiaries that make up the Asset Management
Segment (excluding the effects of market action) from December 31, 2000 until
a date prior to the closing as the result of purchases of and exchanges into
and withdrawals from and exchanges out of those portfolios. The maximum
purchase price adjustment under this provision would be $180 million;
- upward or downward based on increases or decreases in the tangible net worth
of the Asset Management Segment from April 1, 2001 through a date prior to
the closing;
- downward based on decreases of more than 20% (excluding the effects of sales
and redemptions) in the market values of the assets under management of the
Asset Management Segment between March 31, 2001 and a date prior to the
closing; and
- upward or downward based on the estimated value of amounts owing to or by LFC
at the time of closing in respect of taxes with respect to the income of the
Asset Management Segment and the settlement of certain inter-company
accounts, agreements and arrangements
16
21
between LFC and the subsidiaries that make up the Asset Management Segment.
The transaction will not occur unless various conditions are satisfied (or
waived by the parties, if permitted by law). One of these conditions is
obtaining approval or consent from investment advisory clients of the Fund
Manager, any affiliated sub-advisors and other LFC affiliates that constitute
the Asset Management Segment (including fund clients) whose accounts represent
80% of the Asset Management Segment's assets under management as of March 31,
2001. Because of these conditions, approval or disapproval by a Fund's
shareholders of a New Advisory Agreement and New Portfolio Management Agreements
for their Fund, taken together with other clients' consents or approvals, could
affect whether or not the transaction occurs. As described below, certain
officers of the Funds (including one officer who is also a member of the Boards
of the Funds) will receive certain material payments or benefits if the
transaction occurs. The transaction will result in the automatic termination of
the Current Advisory Agreements and Current Portfolio Management Agreements for
each Fund. If for some reason the transaction does not occur, the automatic
termination of the Current Advisory Agreement and Current Portfolio Management
Agreements for each Fund will not occur, and the New Advisory Agreement and New
Portfolio Management Agreements for each Fund will not be entered into, even if
they have been approved by the Funds' shareholders.
Simultaneously with the signing of the Purchase Agreement, at Fleet's request,
Liberty Mutual and LFC entered into a license agreement with Fleet which
provides that upon the closing of the acquisition of the Asset Management
Segment, Fleet will have a perpetual, royalty free, non-transferable,
non-sublicensable, non-exclusive license to use the Liberty mark and trade name,
the Statue of Liberty design and other associated marks and trade names used in
connection with the Asset Management Segment's business. The license agreement
also contains other covenants and provisions more fully set forth in the Fleet
license agreement. Neither Liberty Mutual nor LFC will receive compensation or
other consideration under the Fleet license agreement.
As a result of the acquisition, the Fund Manager and certain of its affiliates
that constitute the Asset Management Segment would become wholly owned, direct
or indirect subsidiaries of Fleet. Fleet is a wholly owned subsidiary of
FleetBoston Financial Corporation, a Boston, Massachusetts-based financial
holding company. Fleet and its affiliates
17
22
offer a comprehensive array of financial solutions to approximately 20 million
customers in more than 20 countries. Their key lines of business include:
- Consumer and Investment Services - includes domestic retail banking to
consumer and small business customers, community banking, student loan
processing, credit card services, and investment services, including mutual
funds and investments, retirement planning, large institutional asset
management and brokerage;
- Corporate and Global Banking - includes commercial finance, including
asset-based lending and leasing; international banking in key Latin American
markets; corporate banking, including specialized industry and institutional
lending; and middle market lending, including commercial lending, government
banking services, trade services and cash management; and
- Capital Markets - includes investment banking services, brokerage,
market-making and principal investing.
Certain Interests of Fund Board Members and Officers.
Substantially all full-time employees of LFC and its subsidiaries (including
officers of the Funds and one officer of the Funds who is also a
Trustee/Director of the Funds) participate in the Liberty Financial Companies,
Inc. and Subsidiaries Non-Commissioned Employee Severance and Retention Plan or
the Liberty Financial Companies, Inc. and Subsidiaries Commissioned Employees
Severance and Retention Plan (the "Retention Plans"). The Retention Plans
provide for cash retention bonuses and the full vesting upon a change of control
of all outstanding options to purchase shares of stock of LFC ("LFC Options")
and shares of restricted stock of LFC ("Restricted Stock") for which the target
price in the applicable restricted stock agreement is less than the value of LFC
common stock on the date of the change of control, even though some of these LFC
Options and Restricted Stock would not otherwise have vested or become fully
exercisable prior to the change of control. The Retention Plans also provide for
enhanced severance benefits to substantially all employees upon a change of
control and additional payments to cover excise tax obligations. With respect to
employees of the subsidiaries that constitute the Asset Management Segment, a
change of control will be deemed to occur under the Retention Plans upon the
completion of the Fleet transaction.
18
23
Certain Brokerage Matters
In their consideration of the New Advisory Agreement and New Portfolio
Management Agreements for their respective Fund, the Boards took account of the
Fund Manager's and the Portfolio Managers' practices regarding the selection and
compensation of brokers and dealers that execute portfolio transactions for the
Funds, and the brokers' and dealers' provision of brokerage and research
services to the Fund Manager and Portfolio Managers. The Fund Manager has
informed the Boards that it does not expect to change these practices as a
result of Fleet's acquisition of the Asset Management Segment. A summary of
these brokerage and soft-dollar practices is set forth in Appendix D.
OTHER INFORMATION
Funds' Administrator. LAMCO also is responsible for the provision of
administrative services to each Fund, including the provision of office space,
shareholder and broker-dealer communications, compensation of all officers and
employees of the Funds who are officers or employees of LAMCO or its affiliates,
and supervision of transfer agency, dividend disbursing, custodial and other
services provided by others. Certain of LAMCO's administrative responsibilities
to the Funds have been delegated to its affiliate, Colonial Management
Associates, Inc., One Financial Center, Boston, Massachusetts 02111.
FUND ANNUAL, QUARTERLY AND SEMI-ANNUAL REPORTS. THE FUNDS HAVE PREVIOUSLY SENT
THEIR ANNUAL REPORTS AND ANY SUBSEQUENT QUARTERLY AND SEMI-ANNUAL REPORTS TO
THEIR SHAREHOLDERS. YOU CAN OBTAIN A COPY OF THESE REPORTS WITHOUT CHARGE BY
WRITING TO LIBERTY ASSET MANAGEMENT COMPANY, 600 ATLANTIC AVENUE, BOSTON,
MASSACHUSETTS 02210 OR BY CALLING 800-542-3863.
Outstanding Shares and Significant Shareholders. Shareholders of record at the
close of business on July 16, 2001 are entitled to notice of and to vote at the
Meeting and any adjourned session. Appendix F to this Proxy Statement lists for
each Fund the total number of shares outstanding as of July 16, 2001 and
entitled to vote at the Meeting. It also identifies holders of more than 5% of
any class of shares of each Fund and contains information about the
shareholdings in the Funds by the Board members and the executive officers of
the Funds.
19
24
INFORMATION ABOUT PROXIES AND THE CONDUCT OF THE MEETING
Solicitation of Proxies. Proxies will be solicited primarily by mailing this
Proxy Statement and its enclosures, but proxies may also be solicited through
further mailings, telephone calls, personal interviews or e-mail by officers of
the Funds or by employees or agents of the Fund Manager or of LFC and its
affiliated companies. In addition, Georgeson Shareholder Communications Inc. has
been engaged to assist in the solicitation of proxies, at an estimated cost of
$18,500.
Costs of Solicitation. All of the costs of the Meeting, including the costs of
soliciting proxies, will be paid by LFC or Fleet. None of these costs will be
borne by the Funds or their shareholders.
Voting and Tabulation of Proxies. Shares represented by duly executed proxies
will be voted as instructed on the proxy. If no instructions are given, the
proxy will be voted in favor of the relevant New Advisory Agreement and the New
Portfolio Management Agreements for each Fund. You may vote by any one of the
following methods: (1) by mailing the enclosed proxy card or (2) by telephone or
use of the Internet (not available for all shareholders; eligible shareholders
will receive an insert with instructions). If you mail the enclosed proxy and no
choice is indicated for a proposal listed in the attached Notice of Meeting,
your proxy will be voted in favor of that proposal. Votes made through use of
the Internet or by telephone must have an indicated choice in order to be
accepted. At any time before it has been voted, your proxy may be revoked in one
of the following ways: (i) by sending a signed, written letter of revocation to
the Secretary of the Funds, (ii) by properly executing a later-dated proxy (by
any of the methods of voting described above), or (iii) by attending the
Meeting, requesting return of any previously delivered proxy and voting in
person.
Votes cast in person or by proxy at the Meeting will be counted by persons
appointed by the Funds as tellers for the Meeting (the "Tellers"). The holders
of a majority of the shares of any Fund outstanding on the record date, present
in person or represented by proxy, constitute a quorum for the transaction of
business by the shareholders of that Fund at the Meeting. In determining whether
a quorum is present, the Tellers will count shares represented by proxies that
reflect abstentions, and "broker non-votes," as shares that are present and
entitled to vote. Since these shares will be counted as present, but not as
voting in-favor of any proposal, these shares will have
20
25
the same effect as if they cast votes against the proposal. "Broker non-votes"
are shares held by brokers or nominees as to which (i) the broker or nominee
does not have discretionary voting power and (ii) the broker or nominee has not
received instructions from the beneficial owner or other person who is entitled
to instruct how the shares will be voted.
Required Vote. For each Fund, the vote required to approve the New Advisory
Agreement and New Portfolio Management Agreements, is the lesser of (1) 67% of
the shares of that Fund that are present at the Meeting, if the holders of more
than 50% of the shares of the Fund outstanding as of the record date are present
or represented by proxy at the Meeting, or (2) more than 50% of the shares of
the Fund outstanding on the record date. If the required vote is not obtained
for any Fund, the Boards will consider what other actions to take in the best
interests of the Funds.
Adjournments; Other Business. If a Fund has not received enough votes by the
time of the Meeting to approve that Fund's New Advisory Agreement and New
Portfolio Management Agreements, the persons named as proxies may propose that
the Meeting be adjourned one or more times as to that Fund to permit further
solicitation of proxies. Any adjournment requires the affirmative vote of more
than 50% of the total number of shares of that Fund that are present in person
or by proxy when the adjournment is being voted on. The persons named as proxies
will vote in favor of any such adjournment all proxies that they are entitled to
vote in favor of the relevant Fund's New Advisory Agreement and New Portfolio
Management Agreements. They will vote against any such adjournment any proxy
that directs them to vote against the New Advisory Agreement and New Portfolio
Management Agreements. They will not vote any proxy that directs them to abstain
from voting on the New Advisory Agreement and New Portfolio Management
Agreements.
The Meeting has been called to transact any business that properly comes before
it. The only business that management of the Funds intends to present or knows
that others will present is the approval of the New Advisory Agreements and New
Portfolio Management Agreements. If any other matters properly come before the
Meeting, and on all matters incidental to the conduct of the Meeting, the
persons named as proxies intend to vote the proxies in accordance with their
judgment, unless the Secretary of the Funds has previously received written
contrary instructions from the shareholder entitled to vote the shares.
21
26
Shareholder Proposals at Future Meetings. Shareholder proposals to be presented
at the 2002 Annual Meeting of Shareholders of one of the Funds must be received
by the Fund on or before October 26, 2001. The fact that a Fund receives a
shareholder proposal in a timely manner does not ensure its inclusion in its
proxy material, since there are other requirements relating to such inclusion.
You may submit shareholder proposals to the Secretary of each Fund, One
Financial Center, Boston, Massachusetts 02111.
22
27
APPENDIX A1
ADVISORY AGREEMENTS
--------------------------------------------------------------------------------
-----------
ADVISORY DATE OF
LAST
FEE RATE DESCRIPTION OF BOARD
SUBMISSION OF
SCHEDULE ACTION REGARDING CURRENT
ADVISORY
(AS A % OF CURRENT ADVISORY AGREEMENT
FOR
AVERAGE AGREEMENT SINCE
SHAREHOLDER APPROVAL
WEEKLY NET DATE OF CURRENT BEGINNING OF FUND'S AND
REASON FOR
NAME OF FUND ASSETS) ADVISORY AGREEMENT LAST FISCAL YEAR
SUBMISSION
--------------------------------------------------------------------------------
-----------
Liberty All- 0.80% of the May 15, 1987 On May 9, 2001, the May 15,
1987
Star Equity first $400 (Amended August 1, Trustees approved (initial
approval)
Fund million; 1997) the Current Advisory
0.72% of Agreement
assets over
$400
million;
0.648% of
assets over
$800
million;
0.584% of
assets over
$1.2 billion
--------------------------------------------------------------------------------
-----------
Liberty All- 0.80% of the August 1, 1998 On May 9, 2001, the April 22,
1998
Star Growth first $300 Directors approved (initial
approval)
Fund, Inc. million; the Current Advisory
0.72% of Agreement
assets over
$300 million
--------------------------------------------------------------------------------
-----------
A1-1
28
THIS PAGE IS INTENTIONALLY LEFT BLANK.
29
APPENDIX A2
PORTFOLIO MANAGEMENT AGREEMENTS
--------------------------------------------------------------------------------
--------
DESCRIPTION OF DATE
OF LAST
BOARD ACTION
SUBMISSION OF
REGARDING
CURRENT
CURRENT
PORTFOLIO
PORTFOLIO
MANAGEMENT
MANAGEMENT
AGREEMENT FOR
PORTFOLIO AGREEMENT SINCE
SHAREHOLDER
MANAGEMENT FEE BEGINNING OF
APPROVAL AND
RATE DATE OF CURRENT PORTFOLIO FUND'S LAST
REASON FOR
NAME OF FUND SCHEDULE(1) MANAGEMENT AGREEMENT FISCAL YEAR
SUBMISSION
--------------------------------------------------------------------------------
--------
Liberty All- The following Mastrapasqua & On May 9, 2001,
Mastrapasqua
Star Equity rates apply to Associates, Inc. -- the Trustees &
Associates,
Fund Portfolio November 1, 2000; approved the Inc.
-- April
Manager's TCW Investment Management Current 18,
2001;
portion of Company -- November 1, Portfolio TCW
average net 1999; Management
Investment
assets of the Boston Partners Asset Agreements
Management
Fund: 0.40% up Management, L.P. -- May
Company --
to $400 11, 1998; April
19,
million; 0.36% Westwood Management 2000;
over $400 Corporation -- November
Boston
million up to 3, 1997;
Partners
$800 million; Oppenheimer Capital -- Asset
0.324% over May 5, 2000
Management,
$800 million L.P.
-- April
to $1.2 21,
1999;
billion;
Westwood
0.292% over
Management
$1.2 billion
Corporation
--April 22,
1998;
Oppenheimer
Capital --
April
19,
2000
(in each
instance to
approve the
Portfolio
Management
Agreement at
the
Annual
Meeting of
Shareholders)
--------------------------------------------------------------------------------
--------
A2-1
30
--------------------------------------------------------------------------------
--------
DESCRIPTION OF DATE
OF LAST
BOARD ACTION
SUBMISSION OF
REGARDING
CURRENT
CURRENT
PORTFOLIO
PORTFOLIO
MANAGEMENT
MANAGEMENT
AGREEMENT FOR
PORTFOLIO AGREEMENT SINCE
SHAREHOLDER
MANAGEMENT FEE BEGINNING OF
APPROVAL AND
RATE DATE OF CURRENT PORTFOLIO FUND'S LAST
REASON FOR
NAME OF FUND SCHEDULE(1) MANAGEMENT AGREEMENT FISCAL YEAR
SUBMISSION
--------------------------------------------------------------------------------
--------
Liberty All- The following TCW Investment Management On May 9, 2001, TCW
Star Growth rates apply to Company -- May 1, 2000; the Directors
Investment
Fund, Inc. Portfolio M.A. Weatherbie & Co., approved the
Management
Manager's Inc. -- May 1, 1999; Current
Company --
portion of William Blair & Co., LLC Portfolio April
18,
average net -- August 1, 1998 Management 2001;
assets of the Agreements M.A.
Fund: 0.40% up
Weatherbie &
to $300 Co.,
Inc. --
million; 0.36% April
19,
over $300 2000;
million
William Blair
&
Co., LLC --
April
16,
1997
(in each
instance to
approve the
Portfolio
Management
Agreement at
the
Annual
Meeting of
Shareholders)
--------------------------------------------------------------------------------
--------
(1) The Fund Manager is solely responsible for paying the Portfolio Management
Fee to the Portfolio Managers from the fees it collects from the Funds.
A2-2
31
APPENDIX B1
FORM OF INVESTMENT ADVISORY AGREEMENT FOR ALL-STAR EQUITY FUND
FUND MANAGEMENT AGREEMENT
FUND MANAGEMENT AGREEMENT dated [ ], 2001, between Liberty All-Star
Equity Fund, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Company"), and Liberty Asset Management Company, a
corporation organized under the laws of the State of Delaware ("Manager").
WHEREAS the Company has been organized by the Manager and will operate as an
investment company registered under the Investment Company Act of 1940
("Investment Company Act") for the purpose of investing and reinvesting its
assets in securities pursuant to the investment objectives, policies and
restrictions set forth in its Declaration of Trust, its By-Laws and its
Registration Statement under the Investment Company Act and the Securities Act
of 1933, all as heretofore amended and supplemented; and the Company desires to
avail itself of the services, information, advice, assistance and facilities of
the Manager and to have the Manager provide or perform for it various
administrative, management and other services; and
WHEREAS the Manager is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and desires to provide services to the Trust
in consideration of and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Company and the Manager agree as follows:
1. Employment of the Manager. The Company hereby employs the Manager to manage
the investment and reinvestment of the Company's assets in the manner set forth
in Section 2(B) of this Agreement, to administer its business and administrative
operations as set forth in Section 2(A) of this Agreement, and to provide the
other services set forth in Section 2 of this Agreement, subject to the
direction of the Trustees and the officers of the Company, for the period, in
the manner, and on the terms hereinafter set forth. The Manager hereby accepts
such employment and agrees during such period to render the services and to
assume the obligations herein set forth. The Manager shall for all purposes
herein be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Company in any way or otherwise be deemed an agent of the
Company.
B1-1
32
2. Obligation of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Corporate Management and Administrative Services.
(1) The Manager shall furnish to the Company adequate (a) office space, which
may be space within the offices of the Manager or in such other place as
may be agreed Upon from time to time, and (b) office furnishings,
facilities and equipment as may be reasonably required for managing and
administering the operations and conducting the business of the Company,
including complying with the securities, tax and other reporting
requirements of the United States and the various states in which the
Company does business, conducting correspondence and other communications
with the shareholders of the Company, and maintaining or supervising the
maintenance of all internal bookkeeping, accounting and auditing services
and records in connection with the Company's investment and business
activities. The Company agrees that its shareholder servicing and record
keeping, transfer agency and dividend disbursing services and certain of
its fund accounting and record keeping services, the computing of net asset
value and the preparation of certain of its records required by Section 31
of the Investment Company Act and the Rules thereunder are to be performed
by Company's transfer and dividend disbursing agent, custodian, Portfolio
Managers (as defined in paragraph 2(B)(3)) or other service providers, and
that with respect to these services Manager's obligations under this
Section 2(A) are supervisory in nature only.
(2) The Manager shall employ or provide and compensate the executive,
administrative, secretarial and clerical personnel necessary to supervise
the provision of the services set forth in subparagraph 2(A)(1), and shall
bear the expense of providing such services, except as may otherwise be
provided in Section 4 of this Agreement. The Manager shall also compensate
all officers and employees of the Company who are officers or employees of
the Manager.
B. Investment Management Services.
(1) The Manager shall have overall supervisory responsibility for the general
management and investment of the Company's assets and
B1-2
33
securities portfolio subject to and in accordance with the investment
objectives and policies of the Company, and any directions which the
Company's Trustees may issue to the Manager from time to time.
(2) The Manager shall provide overall investment programs and strategies for
the Company, shall revise such programs as necessary and shall monitor and
report periodically to the Trustees concerning the implementation of the
programs.
(3) The Company intends to appoint one or more persons or companies ("Portfolio
Managers"), each such Portfolio Manager to have full investment discretion
and to make all determinations with respect to the investment and
reinvestment of the portion of the Company's assets assigned to that
Portfolio Manager and the purchase and sale of portfolio securities with
those assets, all within the Company's investment objectives, policies and
restrictions, and the Company will take such steps as may be necessary to
implement such appointments. The Manager shall not be responsible or liable
for the investment merits of any decision by a Portfolio Manager to
purchase, hold or sell a security for the portfolio of the Company. The
Manager shall advise the Trustees of the Company which Portfolio Managers
the Manager believes are best suited to invest the assets of the Company;
shall monitor and evaluate the investment performance of each Portfolio
Manager employed by the Company; shall allocate and reallocate the portion
of the Company's assets to be managed by each Portfolio Manager; shall
recommend changes of or additional Portfolio Managers when appropriate; and
shall coordinate the investment activities of the Portfolio Managers to
ensure compliance with the Company's investment policies and restrictions
and applicable laws, including the Investment Company Act and the Internal
Revenue Code of 1986.
(4) The Manager shall render regular reports to the Company, at regular
meetings of the Trustees, of, among other things, the decisions which it
has made with respect to the allocation of the Company's assets among
Portfolio Managers.
C. Provision of Information Necessary for Preparation of Securities
Registration Statements. Amendments and Other Materials.
B1-3
34
The Manager will make available and provide financial, accounting and
statistical information concerning the Manager required by the Company in the
preparation of registration statements, reports and other documents required by
federal and state securities laws, and such other information as the Company may
reasonably request for use in the preparation of such documents or of other
materials necessary or helpful for the distribution of the Company's shares.
D. Other Obligations and Services.
(l) The Manager shall make available its officers and employees to the Trustees
and officers of the Company for consultation and discussions regarding the
administration and management of the Company and its investment activities.
(2) The Manager will adopt a written code of ethics complying with the
requirements of Rule 17j-1 under the Investment Company Act and will
provide the Company with a copy of the code of ethics and evidence of its
adoption. Within forty-five (45) days of the end of the last calendar
quarter of each year while this Agreement is in effect, the President or a
Vice President of the Manager shall certify to the Company that the Manager
has complied with the requirements of Rule 17j-1 during the previous year
and that there has been no violation of the Manager's code of ethics or, if
such a violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of the Company, the
Manager shall permit the Company, its employees or its agents to examine
the reports required to be made by the Manager by Rule 17j-1(c)(1).
3. Execution and Allocation of Portfolio Brokerage Commissions. The Portfolio
Managers, subject to and in accordance with any directions the Company may issue
from time to time, shall place, in the name of the Company, orders for the
execution of the Company's portfolio transactions. When placing such orders, the
obligation of the Portfolio Managers shall be as provided in paragraph 5 of the
form of Portfolio Management Agreement filed as Exhibit 6(b) to the Company's
initial Registration Statement under the Investment Company Act and the
Securities Act of 1933, a copy of which paragraph 5 is attached hereto as
Exhibit A. The Manager will oversee the placement of orders by Portfolio
Managers in accordance with paragraph 5 of their respective Portfolio Management
Agreements and will render regular reports to the Company of the total brokerage
business placed on behalf of the Company by the Portfolio
B1-4
35
Managers and the manner in which such brokerage business has been allocated.
4. Expenses of the Company. It is understood that the Company will pay all its
expenses other than those expressly assumed by the Manager herein, which
expenses payable by the Company shall include:
A. Fees of the Manager;
B. Expenses of all audits by independent public accountants;
C. Expenses of transfer agent, registrar, dividend disbursing agent and
shareholder record keeping services (including reasonable fees and expenses
payable to the Manager for such services);
D. Expenses of custodial services including fund accounting and record keeping
services provided by the Custodian;
E. Expenses of obtaining quotations for calculating the value of the Company's
net assets;
F. Salaries and other compensation of any of its executive officers and
employees who are not officers, directors, stockholders or employees of the
Manager or any of its affiliates;
G. Taxes levied against the Company and the expenses of preparing tax returns
and reports;
H. Brokerage fees and commissions in connection with the purchase and sale of
portfolio securities for the Company;
I. Organizational and offering expenses;
J. Costs, including the interest expense, of borrowing money;
K. Costs and/or fees incident to Trustee and shareholder meetings of the
Company, the preparation and mailings of proxy material, prospectuses and
reports of the Company to its shareholders, the filing of reports with
regulatory bodies, the maintenance of the Company's legal existence,
membership dues and fees of investment company industry trade associations,
the listing (and maintenance of such listing) of the Company's shares on
stock exchanges, and the registration of shares with federal and state
securities authorities;
L. Legal fees and expenses (including reasonable fees for legal services
rendered by the Manager or its affiliates), including the legal fees
related to the registration and continued qualification of the Company's
shares for sale;
B1-5
36
M. Costs of printing stock certificates representing shares of the Company;
N. Trustees' fees and expenses of Trustees who are not directors, officers,
employees or stockholders of the Manager or any of its affiliates;
O. Its pro rata portion of the fidelity bond required by Section 17(g) of the
Investment Company Act, or other insurance premiums;
P. Fees payable to federal and state authorities in connection with the
registration of the Company's shares.
5. Activities and Affiliates of the Manager.
A. The services of the Manager to the Company hereunder are not to be deemed
exclusive, and the Manager and any of its affiliates shall be free to render
similar services to others. The Manager shall use the same skill and care in
the management of the Company's assets as it uses in the administration of
other accounts to which it provides asset management, consulting and
portfolio manager selection services, but shall not be obligated to give the
Company more favorable or preferential treatment vis-a-vis its other
clients.
B. Subject to and in accordance with the Declaration of Trust and By-Laws of
the Company and to Section 10(a) of the Investment Company Act, it is
understood that Trustees, officers, agents and shareholders of the Company
are or may be interested in the Manager or its affiliates as directors,
officers, agents or stockholders of the Manager or its affiliates; that
directors, officers, agents and stockholders of the Manager or its
affiliates are or may be interested in the Company as trustees, officers,
agents, shareholders or otherwise; that the Manager or its affiliates may be
interested in the Company as shareholders or otherwise; and that the effect
of any such interests shall be governed by said Declaration of Trust, By-
Laws and the Investment Company Act.
6. Fees for Services: Compensation of Portfolio Managers. The compensation of
the Manager for its services under this Agreement shall be calculated and paid
by the Fund in accordance with the attached Exhibit B. The Manager will
compensate the Portfolio Managers as provided in Exhibit B.
B1-6
37
7. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of the
Manager, the Manager shall not be subject to liability to the Company or to
any shareholder of the Company for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
B. No provision of this Agreement shall be construed to protect any Trustee or
officer of the Company, or the Manager, from liability in violation of
Sections 17(h) and (i) of the Investment Company Act.
8. Renewal and Termination.
A. This Agreement shall continue in effect until [ ] and shall continue
from year to year thereafter provided such continuance is specifically
approved at least annually by (i) the Company's Board of Trustees or (ii) a
vote of a "majority" (as defined in the Investment Company Act) of the
Company's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are
not "interested persons" (as defined in the Investment Company Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act
and the Rules and Regulations thereunder.
B. This Agreement:
(a) may at any time be terminated without the payment of any penalty either by
vote of the Trustees of the Company or by vote of a majority of the
outstanding voting securities of the Company, on sixty (60) days' written
notice to the Manager;
(b) shall immediately terminate in the event of its assignment (as that term is
defined in the Investment Company Act); and
(c) may be terminated by the Manager on sixty (60) days' written notice to the
Company.
C. Any notice under this Agreement shall be given in writing addressed and
delivered or mailed postpaid, to the other party to this Agreement at its
principal place of business.
B1-7
38
9. No Personal Liability. Reference is hereby made to the Declaration of Trust
dated August 20, 1986 establishing the Company, a copy of which has been filed
with the Secretary of the Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The name Liberty All-Star Equity Fund refers to the Trustees under said
Declaration of Trust, as Trustees and not personally, and no Trustee,
shareholder, officer, agent or employee of the Company shall be held to any
personal liability hereunder or in connection with the affairs of the Company,
but only the trust estate under said Declaration of Trust is liable under this
Agreement. Without limiting the generality of the foregoing, neither the Manager
nor any of its officers, directors, shareholders or employees shall, under any
circumstances, have recourse or cause or willingly permit recourse to be had
directly or indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Company or of any
successor of the Company, whether such liability now exists or is hereafter
incurred for claims against the trust estate, but shall look for payment solely
to said trust estate, or the assets of such successor of the Company.
10. Use of Name. The Company may use the name "Liberty All-Star" or a similar
name only for so long as this Agreement or any extension, renewal or amendment
hereof remains in effect, including any similar agreement with any organization
which shall have succeeded to the Manager's business as investment adviser. If
this Agreement is no longer in effect, the Company (to the extent it lawfully
can) will cease to use such name or any other name indicating that it is advised
by or otherwise connected with the Manager. The Trust acknowledges that the
Manager may grant the non-exclusive right to use the name "Liberty All-Star" to
any other corporation or entity, including but not limited to any investment
company of which the Manager or any subsidiary or affiliate thereof or any
successor to the business or any thereof shall be an investment advisor.
11. Termination of Fund Management Agreement dated May 15, 1987, and amended
August 1, 1997. Upon execution of this Agreement on behalf of the Company and
the Manager, the existing Fund Management Agreement dated May 15, 1987, and
amended August 1, 1997, shall terminate.
B1-8
39
12. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13. Governing Law. To the extent that state law has not been preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
LIBERTY ALL-STAR EQUITY FUND
SEAL
ATTEST By:
---------------------------
Title:
-------------------------
LIBERTY ASSET MANAGEMENT COMPANY
SEAL
ATTEST By:
---------------------------
Title:
-------------------------
B1-9
40
EXHIBIT A
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager, and to select the markets on or in which the
transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall be to seek
to obtain best net price and execution for the Fund. However, this
responsibility shall not obligate the Portfolio Manager to solicit competitive
bids for each transaction or to seek the lowest available commission cost to the
Fund, so long as the Portfolio Manager reasonably believes that the broker or
dealer selected by it can be expected to obtain a "best execution" market price
on the particular transaction and determines in good faith that the commission
cost is reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act of 1934)
provided by such broker or dealer to the Portfolio Manager viewed in terms of
either that particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the Fund, as to which
the Portfolio Manager exercises investment discretion, notwithstanding that the
Fund may not be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on the
particular transaction.
B. Subject to the requirements of paragraph A above, the Fund Manager shall
have the right to request that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Fund Manager and the
Portfolio Manager, shall be executed by brokers and dealers that provide
brokerage or research services to the Fund or the Fund Manager, or as to which
an on-going relationship will be of value to the Fund in the management of its
assets, which services and relationship may, but need not, be of direct benefit
to the Fund Account. The Portfolio Manager shall not be responsible under
paragraph A above with respect to transactions executed through any such broker
or dealer.
C. The Portfolio Manager shall not execute any portfolio transactions for the
Fund Account with a broker or dealer which is an "affiliated person" (as defined
in the Act) of the Fund, the Portfolio Manager or any other Portfolio Manager of
the Fund without the prior written approval of the Fund. The Fund will provide
the Portfolio Manager with a list of brokers and dealers which are "affiliated
persons" of the Fund or its Portfolio Managers.
B1-10
41
EXHIBIT B
MANAGER FEE
For the corporate management and administrative services provided to the Company
pursuant to Section 2(A) of this Agreement, the Company will pay to the Manager,
on or before the 10th day of each calendar month, a monthly fee for the previous
calendar month in the amount of l/12th of the following percentages of the
average of the net asset values of the Company as of the close of the last
business day of the New York Stock Exchange in each calendar week during the
preceding calendar month: 0.20% of the first $400 million of such average net
asset value; 0.18% of such average net asset value exceeding $400 million up to
and including $800 million; 0.162% of such average net asset value exceeding
$800 million up to and including $1.2 billion; and 0.146% of such average net
asset value exceeding $1.2 billion.
For the investment management services provided to the Company pursuant to
Section 2(B) of this Agreement, the Company will pay to the Manager, on or
before the 10th day of each calendar month, a monthly fee for the previous
calendar month in the amount of l/12th of the following percentages of the
average of the net asset values of the Company as of the close of the last
business day of the New York Stock Exchange in each calendar week during the
preceding calendar month: 0.80% of the first $400 million of such average net
asset value; 0.72% of such average net asset value exceeding $400 million up to
and including $800 million; 0.648% of such average net asset value exceeding
$800 million up to and including $1.2 billion; and 0.584% of such average net
asset value exceeding $1.2 billion.
Pursuant to Section 6 of this Agreement, the Manager will pay each Portfolio
Manager a monthly fee in the amount of l/12th of 0.40% of the amount obtained by
multiplying the Portfolio Manager's Percentage times such average net asset
values of the Company on the foregoing dates up to $400 million; 0.36% of the
amount obtained by multiplying the Portfolio Manager's Percentage times such
average net asset value exceeding $400 million up to and including $800 million;
0.324% of the amount obtained by multiplying the Portfolio Manager's Percentage
times such average net asset value exceeding $800 million up to and including
$1.2 billion; and 0.292% of the amount obtained by multiplying the Portfolio
Manager's Percentage times such average net asset value exceeding $1.2 billion.
B1-11
42
"Portfolio Manager's Percentage" means the percentage obtained by dividing the
average of the net asset values on the foregoing dates of the portion of the
portfolio assets of the Company assigned to that Portfolio Manager by the
average of the net asset values on such dates of the Company as a whole.
The foregoing fees shall be pro-rated for any month during which this Agreement
is in effect for only a portion of the month.
B1-12
43
FORM OF INVESTMENT ADVISORY AGREEMENT FOR ALL-STAR GROWTH FUND
FUND MANAGEMENT AGREEMENT
FUND MANAGEMENT AGREEMENT dated [ ], 2001 between Liberty All-Star
Growth Fund, Inc., a corporation organized under the laws of the State of
Maryland (the "Company"), and Liberty Asset Management Company, a corporation
organized under the laws of the State of Delaware (the "Manager").
WHEREAS, the Company desires to employ the Manager (i) to provide certain
administrative services as described herein to the Company, and (ii) to provide
investment management services as described herein in accordance with the
Company's investment objective and policies as stated in the Company's
Registration Statement, as from time to time in effect, under the Investment
Company Act of 1940 (the "Investment Company Act") and in conformity with the
Company's Articles of Incorporation and the Investment Company Act, as the same
may from time to time be amended.
WHEREAS the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and desires to provide services to
the Company in consideration of and on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, the Company and the Manager agree as follows:
1. Employment of the Manager. The Company hereby employs the Manager to
administer its business and administrative operations as set forth in Section
2(A) of this Agreement, and to manage the investment and reinvestment of the
Company's assets as set forth in Section 2(B) below, all subject to the
direction of the Board of Directors of the Company, for the period, in the
manner, and on the terms hereinafter set forth. The Manager hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth. The Manager shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Company in any way or otherwise be deemed an agent of the Company.
B1-13
44
2. Obligation of and Services to be Provided by the Manager. The Manager
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
A. Administrative Services
(1) The Manager shall provide, either directly or through an affiliate,
general administrative services and oversee the operations of the Company
("Administrative Services"). The Administrative Services shall not include
custodial, transfer agency, or pricing and bookkeeping services, but shall
include, without limitation:
(i) the maintenance of the Company's offices within the Manager's
offices in Boston, Massachusetts and the maintenance of the corporate books
and records of the Company, other than the books and records maintained by
the transfer agent, the custodian or the fund accountant of the Company, and
making arrangements for the meetings of the Directors of the Company,
including the preparation of agendas and supporting materials therefor;
(ii) the preparation of such financial information as is reasonably
necessary for reports to shareholders of the Company, reports to the Board
of Directors and the officers of the Company, and reports of the Company to
the Securities and Exchange Commission, the Internal Revenue Service and
other Federal and state regulatory agencies;
(iii) the provision of such advice that may be reasonably necessary
properly to account for the Company's financial transactions and to maintain
the Company's accounting procedures and records so as to insure compliance
with generally accepted accounting and tax practices and rules;
(iv) the monitoring of the preparation and maintenance by the Company's
custodian or other agents of all records that may be reasonably required in
connection with the audit performed by the Company's independent auditors,
the Securities and Exchange Commission, the Internal Revenue Service or
other Federal or state regulatory agencies;
(v) the preparation of communications and reports to shareholders of
the Company and making arrangements for meetings of such shareholders;
B1-14
45
(vi) the preparation and filing of all reports and all updating and
other amendments to the Company's registration statements necessary to
maintain the registration of the Company under the 1940 Act and the listing
of its common stock on the New York Stock Exchange;
(vii) the preparation of the Company's tax returns;
(viii) the periodic computation, and reporting as necessary to the
Directors of the Company, of the Company's compliance with its investment
objective, policies and restrictions and the portfolio diversification and
other portfolio requirements of the Investment Company Act and the Internal
Revenue Code of 1986, as amended (the "Code"); and
(ix) the negotiation of agreements or other arrangements with, and
general oversight and coordination of, agents and others retained by the
Company to provide custodial, transfer agency, net asset value computation,
portfolio accounting, legal, tax and accounting services.
(2) The Manager will permit individuals who are officers or employees of the
Manager to serve (if duly elected or appointed) as officers, Directors, members
of any committee of the Board of Directors, members of any advisory board, or
members of any other committee of the Company, without remuneration or other
cost to the Company.
B. Investment Management Services.
(1) The Manager shall have overall supervisory responsibility for the
general management and investment of the Company's assets, subject to and in
accordance with the investment objectives and policies of the Company, and
any directions which the Board of Directors of the Company may issue to the
Manager from time to time.
(2) The Manager shall provide overall investment programs and
strategies with respect to the Company's assets, shall revise such programs
as necessary and shall monitor and report periodically to the Board of
Directors of the Company concerning the implementation of the programs.
(3) The Company intends to appoint one or more persons or companies
("Portfolio Managers"), each such Portfolio Manager to
B1-15
46
have full investment discretion and to make all determinations with respect
to the investment and reinvestment of the portion of the Company's assets
assigned to that Portfolio Manager by the Manager and the purchase and sale
of portfolio securities with those assets, all within the Company's
investment objectives, policies and restrictions, and the Company will take
such steps as may be necessary to implement such appointments. The Manager
shall not be responsible or liable for the investment merits of any decision
by a Portfolio Manager to purchase, hold or sell a security for the
portfolio of the Company. The Manager shall advise the Board of Directors of
the Company which Portfolio Managers the Manager believes are best suited to
invest the Company's assets; shall monitor and evaluate the investment
performance of each Portfolio Manager employed by the Company; shall
allocate and reallocate from time to time, in its discretion, the portion of
the Company's assets to be managed by each Portfolio Manager; shall
recommend changes of or additional Portfolio Managers when appropriate; and
shall coordinate the investment activities of the Portfolio Managers to
ensure compliance with the Company's investment policies and restrictions
and applicable laws, including the Investment Company Act and the Code.
(4) The Manager shall render regular reports to the Company, at regular
meetings of the Board of Directors, of, among other things, the decisions
which it has made with respect to the allocation of the Company's assets
among Portfolio Managers.
3. Allocation of Expenses
(1) Expenses paid by the Manager. The Manager shall at its own expense
furnish or provide and pay the cost of such office space, office equipment,
personnel and office services as the Manager requires for the performance of its
administrative and investment management services hereunder. The Manager shall
not be obligated to bear any other expenses incidental to the operations or
business of the Company, and the payment or assumption by the Manager of any
expense of the Company that the Manager is not required by this Agreement to pay
or assume shall not obligate the Manager to pay or assume the same or any
similar expense on any subsequent occasion.
(2) Expenses paid by the Company. The Company shall pay all expenses
incurred in the operation of the Company including, among
B1-16
47
other things, expenses for legal and auditing services, costs of printing
proxies, stock certificates and shareholder reports, charges of the custodian,
any sub-custodian and transfer agent, Securities and Exchange Commission fees,
fees and expenses of Directors of the Company who are not "affiliated persons"
(as defined in the Investment Company Act) of the Manager, any other investment
adviser of the Company, or any of their affiliated persons, accounting and
pricing costs, membership fees in trade associations, insurance, interest,
brokerage costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying the Company's shares for sale in various states, litigation and other
extraordinary or nonrecurring expenses, and other expenses properly payable by
the Company.
4. Activities and Affiliates of the Manager.
A. The services of the Manager to the Company hereunder are not to be
deemed exclusive, and the Manager and any of its affiliates shall be free to
render similar services to others. The Manager shall use the same skill and
care in the management of the Company's assets as it uses in the
administration of other accounts to which it provides asset management,
consulting and portfolio manager selection services, but shall not be
obligated to give the Company more favorable or preferential treatment
vis-a-vis its other clients.
B. Subject to and in accordance with the Articles of Incorporation and
By-Laws of the Company and to Section 10(a) of the Investment Company Act,
it is understood that Directors, officers, agents and shareholders of the
Company may be interested in the Manager or its affiliates as directors,
officers, agents or stockholders of the Manager or its affiliates; that
directors, officers, agents and stockholders of the Manager or its
affiliates are or may be interested in the Company as Directors, officers,
agents, shareholders or otherwise; that the Manager or its affiliates may be
interested in the Company as shareholders or otherwise; and that the effect
of any such interests shall be governed by the Investment Company Act.
5. Fees for Services: Compensation of Portfolio Managers. The compensation
of the Manager for its services under this Agreement shall be calculated and
paid by the Fund in accordance with the Exhibit I attached hereto. The Manager
will compensate the Portfolio Managers as provided in Exhibit I.
B1-17
48
6. Liabilities of the Manager.
A. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder on the part of the
Manager, the Manager shall not be subject to liability to the Company or to
any shareholder of the Company for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
B. No provision of this Agreement shall be construed to protect any
Director or officer of the Company, or the Manager, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
7. Renewal and Termination.
A. This Agreement shall continue in effect until [ ], and shall
continue from year to year thereafter provided such continuance is
specifically approved at least annually by (i) the Company's Board of
Directors or (ii) a vote of a "majority" (as defined in the Investment
Company Act) of the Company's outstanding voting securities, provided that
in either event such continuance is also approved by a majority of the Board
of Directors who are not "interested persons" (as defined in the Investment
Company Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the
Investment Company Act and the Rules and Regulations thereunder.
B. This Agreement:
(a) may at any time be terminated without the payment of any
penalty either by vote of the Board of Directors of the Company or by
vote of a majority of the outstanding voting securities of the Company,
on sixty (60) days' written notice to the Manager;
(b) shall immediately terminate in the event of its assignment (as
that term is defined in the Investment Company Act); and
B1-18
49
(c) may be terminated by the Manager on sixty (60) days' written
notice to the Company.
C. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed postpaid to the other party to this Agreement at its
principal place of business.
8. Use of Name. The Company may use the name "Liberty All-Star" only so
long as this Agreement remains in effect. If this Agreement is no longer in
effect, the Company (to the extent it lawfully can) shall cease using such name
or any other name indicating that it is advised by or otherwise connected with
the Manager. The Manager may grant the non-exclusive right to use the name
"Liberty All-Star" to any other entity, including any other investment company
of which the Manager or any of its affiliates is the investment adviser or
distributor.
9. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. Governing Law. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the Commonwealth
of Massachusetts.
11. Prior Agreement Superceded. This Agreement supercedes and replaces the
Fund Management Agreement dated August 1, 1998 between the Company and the
Manager.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
LIBERTY ALL-STAR GROWTH FUND, INC.
By:
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By:
Title:
B1-19
50
EXHIBIT I
MANAGER FEE
(A) For the Administrative Services provided to the Company pursuant to
Section 2(A) of this Agreement, the Company will pay to the Manager, on the
first business day of each calendar quarter, a fee for the previous calendar
quarter at the rate of:
.05% (.20% annually) of the average weekly net assets of the
Company up to and including $300 million; and
.045% (.18% annually) of the average weekly net assets of the
Company exceeding $300 million;
(B) For the investment management services provided to the Company pursuant
to Section 2(B) of this Agreement, the Company will pay to the Manager, on the
first business day of each calendar quarter, a fee for the previous calendar
quarter at the rate of:
.20% (.80% annually) of the average weekly net assets of the
Company up to and including $300 million; and
.18% (.72% annually) of the average weekly net assets of the
Company exceeding $300 million.
(C) Pursuant to Section 5 of this Agreement, the Manager will pay to each
Portfolio Manager, on or before the fifth business day of each calendar quarter,
a fee for the previous calendar quarter at the rate of:
.10% (.40% annually) of the Portfolio Manager's Percentage (as
defined below) of the average weekly net assets of the Company up to
and including $300 million; and
.09% (.36% annually) of the Portfolio Manager's Percentage of the
average weekly net assets of the Company exceeding $300 million.
Each quarterly payment set forth above shall be based on the average weekly
net assets of the Company during such previous calendar quarter. The fee for the
period from the date this Agreement becomes effective to the end of the calendar
quarter will be prorated according to the proportion that such period bears to
the full quarterly period. Upon any termination of this Agreement before the end
of a calendar quarter, the fee for the part of that calendar quarter during
which this Agreement
B1-20
51
was in effect shall be prorated according to the proportion that such period
bears to the full quarterly period and will be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Manager, the value of the Company's net assets will be computed at the times
and in the manner specified in the Company's Registration Statement under the
Investment Company Act as from time to time in effect.
"Portfolio Manager's Percentage" means the percentage obtained by dividing
the average weekly net assets of that portion of the Company's assets assigned
to that Portfolio Manager by the total of the Company's average weekly net
assets.
B1-21
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53
APPENDIX B2
FORM OF PORTFOLIO MANAGEMENT AGREEMENT
NOTE: THE BRACKETED TEXT APPEARS ONLY IN THE PORTFOLIO MANAGEMENT AGREEMENT
BETWEEN THE GROWTH FUND AND TCW INVESTMENT MANAGEMENT COMPANY, AND BETWEEN THE
EQUITY FUND AND MASTRAPASQUA & ASSOCIATES, INC. THE ITALICIZED TEXT ONLY APPEARS
IN THE PORTFOLIO MANAGEMENT AGREEMENTS BETWEEN GROWTH FUND AND WILLIAM BLAIR &
COMPANY, L.L.C. AND M.A. WEATHERBIE & CO., INC., AND BETWEEN EQUITY FUND AND
OPPENHEIMER CAPITAL, BOSTON PARTNERS ASSET MANAGEMENT, L.P., WESTWOOD MANAGEMENT
CORP. AND TCW INVESTMENT MANAGEMENT COMPANY.
PORTFOLIO MANAGEMENT AGREEMENT
[ ], 2001
[PORTFOLIO MANAGER]
[ADDRESS]
Re: Portfolio Management Agreement
Ladies and Gentlemen:
Liberty All-Star [ ] Fund (the "Fund") is a diversified
closed-end investment company registered under the Investment Company Act of
1940 (the "Act"), and is subject to the rules and regulations promulgated
thereunder.
Liberty Asset Management Company (the "Fund Manager") evaluates and
recommends portfolio managers for the assets of the Fund, and is responsible for
the day-to-day corporate management and Fund administration of the Fund.
1. Employment as a Portfolio Manager. The Fund being duly authorized hereby
employs [ ] (the "Portfolio Manager") as a discretionary portfolio
manager, on the terms and conditions set forth herein, of that portion of the
Fund's assets which the Fund Manager determines to assign to the Portfolio
Manager (those assets being referred to as the "Portfolio Manager Account"). The
Fund Manager may, from time to time, allocate and reallocate the Fund's assets
among
B2-1
54
the Portfolio Manager and the other portfolio managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio Manager
accepts its employment as a discretionary portfolio manager and agrees to use
its best professional judgment to make timely investment decisions for the
Portfolio Manager Account in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing
portfolio management services to the Portfolio Manager Account, the Portfolio
Manager shall be subject to the investment objectives, policies and restrictions
of the Fund as set forth in its current Registration Statement under the Act, as
the same may be modified from time to time (the "Registration Statement"), and
the investment restrictions set forth in the Act and the Rules thereunder (as
and to the extent set forth in the Registration Statement or in other
documentation furnished to the Portfolio Manager by the Fund or the Fund
Manager), to the supervision and control of the Board of [Trustees/Directors] of
the Fund, and to instructions from the Fund Manager. The Portfolio Manager shall
not, without the prior approval of the Fund or the Fund Manager, effect any
transactions which would cause the Portfolio Manager Account, treated as a
separate fund, to be out of compliance with any of such restrictions or
policies.
4. Transaction Procedures. All portfolio transactions for the Portfolio
Manager Account will be consummated by payment to or delivery by the custodian
of the Fund (the "Custodian"), or such depositories or agents as may be
designated by the Custodian in writing, as custodian for the Fund, of all cash
and/or securities due to or from the Portfolio Manager Account, and the
Portfolio Manager shall not have possession or custody thereof or any
responsibility or liability with respect to such custody. The Portfolio Manager
shall advise and confirm in writing to the Custodian all investment orders for
the Portfolio Manager Account placed by it with brokers and dealers at the time
and in the manner set forth in Schedule A hereto (as amended from time to time
by the Fund Manager). The Fund shall issue to the Custodian such instructions as
may be appropriate in connection with the settlement of any transaction
initiated by the Portfolio Manager. The Fund shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and,
upon giving proper instructions to the Custodian, the Portfolio
B2-2
55
Manager shall have no responsibility or liability with respect to custodial
arrangements or the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager for the Portfolio Manager Account, and to
select the markets on or in which the transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall be
to seek to obtain best net price and execution for the Fund. However, this
responsibility shall not obligate the Portfolio Manager to solicit
competitive bids for each transaction or to seek the lowest available
commission cost to the Fund, so long as the Portfolio Manager reasonably
believes that the broker or dealer selected by it can be expected to obtain
a "best execution" market price on the particular transaction and determines
in good faith that the commission cost is reasonable in relation to the
value of the brokerage and research services (as defined in Section 28(e)(3)
of the Securities Exchange Act of 1934) provided by such broker or dealer to
the Portfolio Manager viewed in terms of either that particular transaction
or of the Portfolio Manager's overall responsibilities with respect to its
clients, including the Fund, as to which the Portfolio Manager exercises
investment discretion, notwithstanding that the Fund may not be the direct
or exclusive beneficiary of any such services or that another broker may be
willing to charge the Fund a lower commission on the particular transaction.
B. Subject to the requirements of paragraph A above, the Fund Manager
shall have the right to request that transactions giving rise to brokerage
commissions, in an amount to be agreed upon by the Fund Manager and the
Portfolio Manager, shall be executed by brokers and dealers that provide
brokerage or research services to the Fund Manager, or as to which an
on-going relationship will be of value to the Fund in the management of its
assets, which services and relationship may, but need not, be of direct
benefit to the Portfolio Manager Account. Notwithstanding any other
provision of this Agreement, the Portfolio Manager shall not be responsible
under paragraph A above with respect to transactions executed through any
such broker or dealer.
B2-3
56
C. The Portfolio Manager shall not execute any portfolio transactions
for the Portfolio Manager Account with [itself or any] broker or dealer
which is an "affiliated person" (as defined in the Act) of the Fund, the
Portfolio Manager or any other Portfolio Manager of the Fund without the
prior written approval of the Fund [except in accordance with SEC Exemptive
Order No. 24288 dated February 15, 2000, a copy of which has been furnished
to the Portfolio Manager, and Rule 17e-1 procedures as approved by the
Fund's Trustees/Directors from time to time]. The Fund Manager will provide
the Portfolio Manager with a list of brokers and dealers which are
"affiliated persons" of the Fund or its Portfolio Managers.
6. Proxies. The Portfolio Manager [Fund] will vote [or direct the voting
of] all proxies solicited by or with respect to the issuers of securities in
which assets of the Portfolio Manager [Fund] Account may be invested from time
to time in accordance with such policies as shall be determined by the Fund
Manager. [in accordance with authorization provided by the Fund Manager from
time to time.]
7. Fees for Services. The compensation of the Portfolio Manager for its
services under this Agreement shall be calculated and paid by the Fund Manager
in accordance with the attached Schedule C. Pursuant to the Fund Management
Agreement between the Fund and the Fund Manager, the Fund Manager is solely
responsible for the payment of fees to the Portfolio Manager, and the Portfolio
Manager agrees to seek payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Fund acknowledges
that the Portfolio Manager or one or more of its affiliates has investment
responsibilities, renders investment advice to and performs other investment
advisory services for other individuals or entities ("Client Accounts"), and
that the Portfolio Manager, its affiliates or any of its or their directors,
[members,] officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts"). Subject
to the provisions of paragraph 2 hereof, the Fund agrees that the Portfolio
Manager or its affiliates may give advice or exercise investment responsibility
and take such other action with respect to other Client Accounts and Affiliated
Accounts which may differ from the advice given or the timing or nature of
action taken with respect to the Portfolio Manager Account, provided that the
Portfolio Manager acts in good faith, and provided further, that it is the
Portfolio Manager's policy to allocate, within its reasonable discretion,
B2-4
57
investment opportunities to the Portfolio Manager Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more Client Accounts and Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio Manager
Account may have an interest from time to time, whether in transactions which
involve the Portfolio Manager Account or otherwise. The Portfolio Manager shall
have no obligation to acquire for the Portfolio Manager Account a position in
any investment which any Client Account or Affiliated Account may acquire, and
the Fund shall have no first refusal, co-investment or other rights in respect
of any such investment, either for the Portfolio Manager Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable for
any action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions from
the Fund, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under this Agreement or breach of its duty or
of its obligations hereunder (provided, however, that the foregoing shall not be
construed to protect the Portfolio Manager from liability in violation of
Section 17(i) of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and the
Fund to comply with applicable law, including any demand of any regulatory or
taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Portfolio Manager Account and the
actions of the Portfolio Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event
of its assignment, as that term is defined in Section 2(a)(4) of the Act. The
Portfolio Manager shall notify the Fund in writing sufficiently in advance of
any proposed change of control, as defined in Section 2(a)(9) of the Act, as
will enable the Fund to consider whether
B2-5
58
an assignment as defined in Section 2(a)(4) of the Act will occur, and whether
to take the steps necessary to enter into a new contract with the Portfolio
Manager.
12. Representations, Warranties and Agreements of the Fund. The Fund
represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide investment
services to the Portfolio Manager Account as contemplated hereby.
B. The Fund will [has] deliver[ed] to the Portfolio Manager a true and
complete copy of its then current registration statement as effective from
time to time and such other documents governing the investment of the Fund
Account and such other information [such instructions governing the
investment of the Portfolio Manager Account] as is necessary for the
Portfolio Manager to carry out its obligations under this Agreement.
[C. Upon certification by the Portfolio Manager that it has adopted a
written code of ethics and procedures reasonably necessary to prevent access
persons, as defined by said code of ethics, from violating the anti-fraud
provisions of Rule 17j-1 under the Act, the Fund will not unreasonably
withhold its approval of the code of ethics adopted by the Portfolio Manager
provided that the Portfolio Manager certifies to the Fund that in all other
material respects the Portfolio Manager's code of ethics complies with Rule
17j-1.]
13. Representations, Warranties and Agreements of the Portfolio
Manager. The Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment
Advisers Act of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the Fund, in
the manner required or permitted by the Act and the Rules thereunder, the
records identified in Schedule B (as Schedule B may be amended from time to
time by the Fund Manager). The Portfolio Manager agrees that such records
are the property of the Fund, and will be surrendered to the Fund promptly
upon request.
B2-6
59
C. It will adopt [and maintain] a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act [and submit same and any
amendments thereto promptly to the Fund, but not less often than annually.
The Portfolio Manager agrees that it will notify the Fund within 15 days of
adopting material changes to its code of ethics]. Within 45 days of the end
of each year while this Agreement is in effect, an officer or general
partner of the Portfolio Manager shall certify [annually] to the Fund that
the Portfolio Manager has complied with the requirements of Rule 17j-1
during the previous year and that there has been no violation of its code of
ethics or, if such a violation has occurred, that appropriate action was
taken in response to such violation [during the previous year and has
procedures reasonably necessary to prevent access persons from violating the
Portfolio Manager's code of ethics. On an annual basis, the Portfolio
Manager shall provide a written report to the Fund describing any issues
arising under its code of ethics or procedures since the last report was so
submitted, including information about material violations of the code or
procedures and any action taken in response to such violations. Upon the
written request of the Fund, the Portfolio Manager shall permit the Fund to
examine the reports required to be maintained by the Portfolio Manager under
Rule 17j-1(c)(l)].
D. Upon request, the Portfolio Manager will promptly supply the Fund
with any information concerning the Portfolio Manager and its stockholders,
employees and affiliates which the Fund may reasonably require in connection
with the preparation of its Registration Statement or amendments thereto,
proxy material, reports and other documents required to be filed under the
Act, the Securities Act of 1933, or other applicable securities laws.
E. [Equity Fund Agreements only] Reference is hereby made to the
Declaration of Trust dated August 20, 1986 establishing the Fund, a copy of
which has been filed with the Secretary of the Commonwealth of Massachusetts
and elsewhere as required by law, and to any and all amendments thereto so
filed or hereafter filed. The name Liberty All-Star Equity Fund refers to
the Trustees under said Declaration of Trust, as Trustees and not
personally, and no Trustee, shareholder, officer, agent or employee of the
Fund shall be held to any personal liability hereunder or in connection with
the affairs of the Fund, but only the trust estate under said Declaration
B2-7
60
of Trust is liable under this Agreement. Without limiting the generality of
the foregoing, neither the Portfolio Manager nor any of its officers,
directors, partners, shareholders or employees shall, under any
circumstances, have recourse or cause or willingly permit recourse to be had
directly or indirectly to any personal, statutory, or other liability of any
shareholder, Trustee, officer, agent or employee of the Fund or of any
successor of the Fund, whether such liability now exists or is hereafter
incurred for claims against the trust estate, but shall look for payment
solely to said trust estate, or the assets of such successor of the Fund.
14. Amendment. This Agreement may be amended at any time, but [(except for
Schedules A and B which may be amended by the Fund Manager acting alone)] only
by written agreement among the Portfolio Manager, the Fund Manager and the Fund,
which amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and the Shareholders of the Fund as and to the
extent required by the Act.
15. Effective Date; Term. This Agreement shall continue until [ ]
and from year to year thereafter provided such continuance is specifically
approved at least annually by (i) the Fund's Board of [Trustees/Directors] or
(ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event such continuance is also
approved by a majority of the Board of [Trustees/Directors] who are not
"interested persons" (as defined in the Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval and provided further that, in accordance with the conditions of the
application of the Fund and Fund Manager for an exemption from 15(a) of the Act
(Rel. Nos. IC 19436 and 19491), the continuance of this Agreement shall be
subject to approval by such "majority" of the Fund's outstanding voting
securities at the regularly scheduled annual meeting of shareholders of the Fund
next following the date of this Agreement. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the Act and the Rules and Regulations
thereunder.
16. Termination. This Agreement may be terminated by any party, without
penalty, immediately upon written notice to the other parties in the event of a
breach of any provision thereof by a party so notified, or otherwise upon not
less than thirty (30) days' written notice
B2-8
61
to the Portfolio Manager in the case of termination by the Fund or the Fund
Manager, or ninety (90) days' written notice to the Fund and the Fund Manager in
the case of termination by the Portfolio Manager, but any such termination shall
not affect the status, obligations or liabilities of any party hereto to the
other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
18. Severability. If any term or condition of this Agreement shall be
invalid or unenforceable to any extent or in any application, then the remainder
of this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
[IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date
first written above.]
LIBERTY ALL-STAR [ ] FUND
By:
Title:
LIBERTY ASSET MANAGEMENT COMPANY
By:
Title:
ACCEPTED:
[PORTFOLIO MANAGER]
By:
Title:
B2-9
62
[PORTFOLIO MANAGER]
By:
Title:
A. Operational Procedures For Portfolio
Transactions [omitted]
SCHEDULES:
B. Record Keeping Requirements
C. Fee Schedule
B2-10
63
LIBERTY ALL-STAR [ ] FUND
PORTFOLIO MANAGEMENT AGREEMENT
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of
the Fund for, or in connection with, the purchase or sale of securities,
whether executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase and
sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund;
(b) The Manager (Liberty Asset Management Company);
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical qualifications
of the brokers and dealers as such.
B2-11
64
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of such
allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made by
a committee or group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of this
record: any memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization.(1)
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Portfolio Manager's
transactions with the Fund.
------------------------
(1) Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendation: i.e., buy, sell, hold) or any internal
reports or portfolio manager reviews.
B2-12
65
SCHEDULE C
PORTFOLIO MANAGER FEE
For services provided to the Fund Account, the Fund Manager will pay to the
Portfolio Manager, on or before the 10th day of each calendar month, a monthly
fee for the previous calendar month in the amount of 1/12(th) of: [ ]% of the
amount obtained by multiplying the Portfolio Manager's Percentage (as
hereinafter defined) times the Average Total Fund Net Assets (as hereinafter
defined) up to $[ ] million; [ ]% of the amount obtained by multiplying
the Portfolio Manager's Percentage times the Average Total Fund Net Assets
exceeding $[ ] million up to and including $[ ] million; [ ]% of the
amount obtained by multiplying the Portfolio Manager's Percentage times the
Average Total Fund Net Assets exceeding $[ ] million up to and including
$[ ] billion; [ ]% of the amount obtained by multiplying the Portfolio
Manager's Percentage times the Average Total Fund Net Assets exceeding $[ ]
billion.
"Portfolio Manager's Percentage" means the percentage obtained by
dividing (i) the average of the net asset values of the Fund Account as of the
close of the last business day of the New York Stock Exchange in each calendar
week during the preceding calendar month, by (ii) the Average Total Fund Net
Assets.
"Average Total Fund Net Assets" means the average of the net asset
values of the Fund as a whole as of the close of the last business day of the
New York Stock Exchange in each calendar week during the preceding calendar
month.
The fee shall be pro-rated for any month during which this Agreement is
in effect for only a portion of the month.
B2-13
66
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67
APPENDIX C
CERTAIN OTHER MUTUAL FUNDS ADVISED BY THE FUND MANAGER AND PORTFOLIO MANAGERS
The Fund Manager and Portfolio Managers act as investment advisors to the
following other mutual funds that have investment objectives similar to the
Funds', for compensation at the annual percentage rates of the corresponding
average net asset levels of those funds set forth below.
--------------------------------------------------------------------------------
--------------------------------------------
FUND MANAGER OTHER FUND(S) NET ASSETS OF
RELATIONSHIP TO
OR PORTFOLIO WITH SIMILAR OTHER FUNDS AT
OTHER FUND (ADVISOR
MANAGER OBJECTIVES MAY 31, 2001 FEE RATE
OR SUB-ADVISOR)
--------------------------------------------------------------------------------
--------------------------------------------
LIBERTY ALL-STAR EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------
LAMCO Liberty All- $68.5 million 0.60%
Advisor
Star Equity
Fund, Variable
Series
Westwood Gabelli $306 million As compensation for its advisory
and administrative Sub-Advisor
Westwood services under the advisory
agreement for the Equity
Equity Fund Fund, the advisor is paid a
monthly fee based upon the
average daily net asset value of
the Fund of 1%. Under
the sub-advisory agreement the
advisor pays Westwood out
of its advisory fees with respect
to the Fund, a fee
computed daily and payable
monthly in an amount equal on
an annualized basis to the
greater of (i) $150,000 per
year on an aggregate basis for
the fund or (ii) 35% of
the net revenues to the advisor
from the fund.
Mastrapasqua Touchstone $171 million 0.60% -- First $50 million
Sub-Advisor
Growth Value 0.50% -- Next $50 million
Fund 0.40% -- Next $100 million
0.35% -- Over $200 million
M&A Growth $15 million 1.00%
Advisor
Value
Touchstone $5 million (see Touchstone Growth Value Fund
above) Sub-Advisor
Annuity
EAI Select $7 million 0.375%
Sub-Advisor
C-1
68
--------------------------------------------------------------------------------
--------------------------------------------
FUND MANAGER OTHER FUND(S) NET ASSETS OF
RELATIONSHIP TO
OR PORTFOLIO WITH SIMILAR OTHER FUNDS AT
OTHER FUND (ADVISOR
MANAGER OBJECTIVES MAY 31, 2001 FEE RATE
OR SUB-ADVISOR)
--------------------------------------------------------------------------------
--------------------------------------------
LIBERTY ALL-STAR EQUITY FUND
--------------------------------------------------------------------------------
--------------------------------------------
TCW TCW Galileo
Agressive
Growth
Equities Fund $166.4 million 1.00%
Advisor
MSDW Mid-Cap $1.1 billion TCW receives 40% of:
Sub-Advisor
Equity Trust 0.75% -- up to $500 million
0.725% -- Next $1.5 billion
0.70% -- Next $1 billion
0.675% -- Over $3 billion
MSDW Select $90.4 million 0.625% -- Up to $500 million
Sub-Advisor
Dimensions 0.60% -- Over $500 million
Investment
Series -- The
Mid-Cap Growth
Portfolio
Oppenheimer Oppenheimer $1.1 billion 0.40% on the first $344 million
Advisor
Quest Value 0.30% on the next $56 million
Fund 0.27% on the next $400 million
0.255% on the next $3.2 billion
0.24% on the next $4 billion
0.225% on everything over $8
billion
OCC $98.6 million 0.80% on the first $400 million
Advisor
Accumulation 0.75% on the next $400 million
Trust: Equity 0.70% on everything over $800
million
Portfolio
C-2
69
--------------------------------------------------------------------------------
--------------------------------------------
FUND MANAGER OTHER FUND(S) NET ASSETS OF
RELATIONSHIP TO
OR PORTFOLIO WITH SIMILAR OTHER FUNDS AT
OTHER FUND (ADVISOR
MANAGER OBJECTIVES MAY 31, 2001 FEE RATE
OR SUB-ADVISOR)
--------------------------------------------------------------------------------
--------------------------------------------
LIBERTY ALL-STAR GROWTH FUND, INC.
--------------------------------------------------------------------------------
--------------------------------------------
William Blair William Blair $466.5 million 0.75%
Advisor
Growth Fund
William Blair $5.7 million 0.80%
Advisor
Tax Managed
Growth Fund
William Blair $8.6 million 0.80%
Advisor
Large Cap
Growth Fund
William Blair $5.1 million 0.80%
Advisor
Disciplined
Large Cap
Fund
C-3
70
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71
APPENDIX D
BROKERAGE PRACTICES
The following is a summary of the brokerage practices of the Fund Manager
and Portfolio Managers:
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each of the Fund's Portfolio Managers has discretion to select brokers and
dealers to execute portfolio transactions initiated by the Portfolio Manager for
the portion of the Fund's portfolio assets allocated to it, and to select the
markets in which such transactions are to be executed. The portfolio management
agreements with the Fund provide, in substance, that in executing portfolio
transactions and selecting brokers or dealers, the primary responsibility of the
Portfolio Manager is to seek to obtain best net price and execution for the
Fund.
The Portfolio Managers are authorized to cause the Fund to pay a commission
to a broker or dealer who provides research products and services to the
Portfolio Manager for executing a portfolio transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction. The Portfolio Managers must determine in good faith,
however, that such commission was reasonable in relation to the value of the
research products and services provided to them, viewed in terms of that
particular transaction or in terms of all the client accounts (including the
Fund) over which the Portfolio Manager exercises investment discretion. It is
possible that certain of the services received by a Portfolio Manager
attributable to a particular transaction will primarily benefit one or more
other accounts for which investment discretion is exercised by the Portfolio
Manager.
In addition, under their portfolio management agreements with the Fund and
LAMCO, the Portfolio Managers, in selecting brokers or dealers to execute
portfolio transactions for the Fund, are authorized to consider (and LAMCO may
request them to consider) brokers or dealers that provide to LAMCO, directly or
through third parties, research products or services such as research reports;
subscriptions to financial publications and research compilations; portfolio
analyses; economic reports; compilations of securities prices, earnings,
dividends and other data; computer hardware and software, quotation equipment
and services used for research; and services of economic or other consultants.
The commissions paid on such transactions may exceed the
D1-1
72
amount of commission another broker would have charged for effecting that
transaction. Research products and services made available to LAMCO include
performance and other qualitative and quantitative data relating to investment
managers in general and the Fund's Portfolio Managers in particular; data
relating to the historic performance of categories of securities associated with
particular investment styles; mutual fund portfolio and performance data; data
relating to portfolio manager changes by pension plan fiduciaries; and related
computer hardware and software, all of which are used by LAMCO in connection
with its selection and monitoring of Portfolio Managers, the assembly of an
appropriate mix of investment styles, and the determination of overall portfolio
strategies. These research products and services may also be used by LAMCO in
connection with its management of its Liberty All-Star Funds. In instances where
LAMCO receives from or through brokers and dealers products or services which
are used both for research purposes and for administrative or other non-research
purposes, LAMCO makes a good faith effort to determine the relative proportions
of such products or services which may be considered as investment research,
based primarily on anticipated usage, and pays for the costs attributable to the
non-research usage in cash.
LAMCO from time to time reaches understandings with each of the Fund's
Portfolio Managers as to the amount of the Fund's portfolio transactions
initiated by such Portfolio Manager that are to be directed to brokers and
dealers which provide or make available research products and services to LAMCO
and the commissions to be charged to the Fund in connection therewith. These
amounts may differ among the Portfolio Managers based on the nature of the
market for the types of securities managed by them and other factors.
Although the Fund does not permit a Portfolio Manager to act or have a
broker-dealer affiliate act as broker for Fund portfolio transactions initiated
by it, the Portfolio Managers are permitted to place Fund portfolio transactions
initiated by them with another Portfolio Manager or its broker-dealer affiliate
for execution on an agency basis, provided the commission does not exceed the
usual and customary broker's commission being paid to other brokers for
comparable transactions and is otherwise in accordance with the Fund's
procedures adopted pursuant to Rule 17e-1 under the Investment Company Act.
During 2000, no Fund portfolio transactions were placed with any Portfolio
Manager or its broker-dealer affiliate.
D1-2
73
On February 15, 2000, the SEC issued the Fund exemptive relief from Sections
10(f), 17(a) and 17(e) and Rule 17e-1 under the Investment Company Act of 1940
to permit (1) broker-dealers which are, or are affiliated with, Portfolio
Managers of the Fund to engage in principal transactions with, and provide
brokerage services to, portion(s) of the Fund advised by another Portfolio
Manager and (2) the Fund to purchase securities either directly from a principal
underwriter which is an affiliate of a Portfolio Manager or from an underwriting
syndicate of which a principal underwriter is affiliated with a Portfolio
Manager of the Fund.
D1-3
74
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75
APPENDIX E
COMPENSATION PAID BY A FUND TO THE FUND MANAGER AND AFFILIATES
FOR EACH FUND'S LAST FISCAL YEAR
($ IN THOUSANDS)
--------------------------------------------------------------------------------
--------------------------------------------------
NET NET BROKERAGE
DISTRIBUTION COMMISSIONS
NET TRANSFER
NET FEES FOR AND ON FUND'S
NET AGENCY AND
PRICING & SHAREHOLDER PORTFOLIO
NET ADMINISTRATIVE SHAREHOLDER
BOOKKEEPING SERVICING TRANSACTIONS
ADVISORY FEES PAID TO SERVICING FEES
SERVICES PAID (12B-1) FEES PAID TO FUND
FEE PAID TO FUND PAID TO FUND
TO FUND PAID TO FUND MANAGER'S
FUND MANAGER'S MANAGER'S
MANAGER'S MANAGER'S BROKERAGE
NAME OF FUND MANAGER AFFILIATES AFFILIATES
AFFILIATES AFFILIATES AFFILIATES
--------------------------------------------------------------------------------
--------------------------------------------------
Liberty All-Star Equity Fund $9,805 $2,452 $0
$283 $0 $0
--------------------------------------------------------------------------------
--------------------------------------------------
Liberty All-Star Growth Fund, 1,732 433 0
69 0 0
Inc.
--------------------------------------------------------------------------------
--------------------------------------------------
-------------------------------- --------------
PERCENTAGE OF
FUND'S TOTAL
BROKERAGE
COMMISSIONS
PAID TO FUND
MANAGER'S
BROKERAGE
NAME OF FUND AFFILIATES
-------------------------------- --------------
Liberty All-Star Equity Fund 0%
---------------------------------------------------------------
Liberty All-Star Growth Fund, 0
Inc.
------------------------------------------------------------------------------
E1-1
76
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77
APPENDIX F
SHARES OUTSTANDING AND ENTITLED TO VOTE
On July 16, 2001, the Funds had outstanding and entitled to vote at the
Meeting the following shares.
--------------------------------------------------------------------
NUMBER OF SHARES OUTSTANDING AND
NAME OF FUND ENTITLED TO VOTE
--------------------------------------------------------------------
Liberty All-Star Equity Fund 103,077,108
--------------------------------------------------------------------
Liberty All-Star Growth Fund, 16,942,250
Inc.
--------------------------------------------------------------------
OWNERSHIP OF SHARES
As of July 16, 2001, the Boards believe that the Board members and officers
of the Funds, as a group, owned less than one percent of the shares of each
Fund. As of July 16, 2001, the Funds believe the following persons owned of
record or beneficially 5% or more of the noted Fund's shares:
--------------------------------------------------------------------------
PERCENTAGE OF
RECORDHOLDER OR SHARES OUTSTANDING
FUND BENEFICIAL OWNER OWNED SHARES OWNED
--------------------------------------------------------------------------
Liberty All-Star Cede+Co. Fast 94,901,515 92.07%
Equity Fund Depository Trust Co.
55 Water Street
New York, NY 10004*
Liberty Mutual 6,901,249 6.69%
Insurance Company
and Liberty Mutual
Fire Insurance
Company
175 Berkeley Street
Boston, MA 02117
--------------------------------------------------------------------------
Liberty All-Star Cede+Co. Fast 14,437,309 85.21%
Growth Fund, Inc. Depository Trust Co.
55 Water Street
New York, NY 10004*
--------------------------------------------------------------------------
---------------
* Shares are believed to be held only as nominee.
F1-1
78
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79
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80
PLEASE VOTE PROMPTLY
*********************************
Your vote is important, no matter how many shares you own. Please vote on the
reverse side of this proxy card and sign in the space(s) provided. Return your
completed proxy card in the enclosed envelope today.
You may receive additional proxies for other accounts. These are not duplicates;
you should sign and return each proxy card in order for your votes to be
counted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The signers of
this proxy hereby appoint William J. Ballou, Kevin M. Carome, Ellen Harrington,
Russell L. Kane, Robert R. Leveille, Joseph R. Palombo, William R. Parmentier,
Jr. and Vincent P. Pietropaolo each of them proxies of the signers, with power
of substitution to vote at the Special Meeting of Shareholders to be held at
Boston, Massachusetts, on Wednesday, September 26, 2001, and at any
adjournments, as specified herein, and in accordance with their best judgement,
on any other business that may properly come before this meeting.
AFTER CAREFUL REVIEW, THE BOARD OF DIRECTORS UNANIMOUSLY HAS RECOMMENDED A VOTE
"FOR" ALL MATTERS.
81
[Liberty Logo]
LIBERTY ALL-STAR GROWTH FUND, INC.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
AND, ABSENT DIRECTION, WILL BE VOTED FOR EACH ITEM BELOW. THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGEMENT AS TO ANY OTHER MATTER.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
1. Proposal to approve a new investment advisory agreement.
For Against Abstain
[ ] [ ] [ ]
2. Proposal to approve new portfolio management agreements.
For Against Abstain
[ ] [ ] [ ]
82
[Instruction: To withhold authority to vote for any individual nominee(s), mark
the "For All Nominees Except as Noted" box and strike a line through the name(s)
of the nominees. Your shares will be voted for the remaining nominee(s).
MARK BOX AT RIGHT FOR ADDRESS CHANGE AND NOTE NEW ADDRESS AT LEFT
[ ]
PLEASE MARK, SIGN DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name or names appear hereon. Joint owners should each
sign personally. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Please be sure to sign and date this proxy.
Date________________
_____________________ ___________________
Shareholder sign here Co-owner sign here
83
PLEASE VOTE PROMPTLY
*********************************
Your vote is important, no matter how many shares you own. Please vote on the
reverse side of this proxy card and sign in the space(s) provided. Return your
completed proxy card in the enclosed envelope today.
You may receive additional proxies for other accounts. These are not duplicates;
you should sign and return each proxy card in order for your votes to be
counted.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The signers of this
proxy hereby appoint William J. Ballou, Kevin M. Carome, Ellen Harrington,
Russell L. Kane, Robert R. Leveille, Joseph R. Palombo, William R. Parmentier,
Jr. and Vincent P. Pietropaolo each of them proxies of the signers, with power
of substitution to vote at the Special Meeting of Shareholders to be held at
Boston, Massachusetts, on Wednesday, September 26, 2001, and at any
adjournments, as specified herein, and in accordance with their best judgement,
on any other business that may properly come before this meeting.
AFTER CAREFUL REVIEW, THE BOARD OF TRUSTEES UNANIMOUSLY HAS RECOMMENDED A VOTE
"FOR" ALL MATTERS.
84
[Liberty Logo]
LIBERTY ALL-STAR EQUITY FUND
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
AND, ABSENT DIRECTION, WILL BE VOTED FOR EACH ITEM BELOW. THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE HOLDER'S BEST JUDGEMENT AS TO ANY OTHER MATTER.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
1. Proposal to approve a new investment advisory agreement.
For Against Abstain
[ ] [ ] [ ]
2. Proposal to approve new portfolio management agreements.
For Against Abstain
[ ] [ ] [ ]
85
[Instruction: To withhold authority to vote for any individual nominee(s), mark
the "For All Nominees Except as Noted" box and strike a line through the name(s)
of the nominees. Your shares will be voted for the remaining nominee(s).
MARK BOX AT RIGHT FOR ADDRESS CHANGE AND NOTE NEW ADDRESS AT LEFT
[ ]
PLEASE MARK, SIGN DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name or names appear hereon. Joint owners should each
sign personally. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Please be sure to sign and date this proxy.
Date________________
_____________________ ___________________
Shareholder sign here Co-owner sign here